Professional accountants were advising victims of the loan charge to enter tax avoidance schemes, for which they were being paid by companies running the schemes.
Sky News has obtained evidence of chartered accountants recommending their clients to participate in loan arrangements offered by companies that were compensating them with commissions.
These schemes were later targeted by HMRC, resulting in workers facing substantial tax bills, sometimes amounting to hundreds of thousands of pounds.
Money blog: Value of a million homes rose 50% since COVID
In some instances, the tax liabilities have been financially devastating. This campaign has pushed individuals to the brink of bankruptcy, torn families apart, and has been linked to 10 suicides.
MPs are now urging for a public inquiry into the involvement of accountants and other professional bodies in the proliferation of these schemes.
An independent review of the loan charge is currently ongoing, albeit with limited scope.
What is the loan charge scandal?
This latest development is part of a scandal that has brought immense suffering to tens of thousands of people who were unknowingly enrolled in tax avoidance schemes.
Among them were contractors who were advised to bypass setting up limited companies and instead opt for payment through these schemes, which claimed to manage their pay and taxes.
These schemes operated by paying employees what were technically loans instead of salaries, enabling them to avoid paying income tax. What seemed like tax deductions on their payslips were actually payments going to the scheme promoters.
Tax avoidance itself is not illegal, but HMRC has successfully contested such schemes in court, leading workers to be liable for the unpaid taxes. There is no implication that these accountants violated any laws.
Richard’s story
Richard Clancey perceives HMRC’s handling of the loan charge as «state-sponsored bullying».
Upon receiving a contract role in 2010, Mr. Clancey, now a retired computer services professional, sought assistance from a Kent-based chartered accountant to establish a limited company.
However, the accountant steered him towards enrolling in a payment scheme instead.
«He provided us with a detailed presentation on the scheme’s benefits and operation,» Mr. Clancey recalled.
«This entailed how they would manage all administrative tasks, pay all due taxes, comply with IR35 and tax laws, pose lower risks than using a limited company, be endorsed by a tax QC, and were currently utilized by several individuals working for HMRC.
«The presentation was complex, and while I didn’t grasp all of it, I trusted the advice of a chartered accountant that using this scheme was legally compliant.»
Read more:
Rise in suicide attempts linked to HMRC crackdown
HMRC accused of ‘dangerous’ new tactics in tax crackdown
The accountant disclosed that he received an introductory fee but omitted mention of ongoing payments.
In 2014, Mr. Clancey was informed via email by his accountant that he had received £257 in commission the previous year. However, he did not receive statements for the previous two years. The email stated that the commission had not cost him anything. The company’s former website page proudly advertised the commission rates. At this point, Mr. Clancey was already under HMRC’s radar. In 2012, tax authorities informed him of his involvement in a tax avoidance scheme. This led to him being asked to pay over £100,000.
Despite the ongoing stress and mental health issues caused by the situation, HMRC claimed to take taxpayers’ wellbeing seriously. Mr. Clancey, like others in his position, expressed frustration at the tax authority’s tactics and lack of accountability of other parties involved.
The government has initiated an independent review of the loan charge, with HMRC pausing its activities until the review is complete. However, the focus remains on helping individuals reach a settlement, without investigating the historical role of accountants and promoters in the schemes.
Politicians and campaigners have called for a broader investigation into the role of chartered accountants in promoting loan schemes. Mr. Clancey’s experience has shattered his trust in financial advice from professionals, highlighting the need for accountability in the sector.
It is a failure on the part of the entire tax industry that accredited professionals can, through their advice, destroy the lives of the individuals that they advise.»
A spokesperson for the Institute of Chartered Accountants in England and Wales, an industry body, said: «We expect chartered accountants to adhere to the highest standards in all of their work, including tax.
«Robust rules for members performing tax work are contained in standards which have been developed and strengthened to prevent the involvement of members in aggressive tax avoidance.»
The organisation strengthened its standards in 2017, after the loan charge legislation was announced, adding that «members must not create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of parliament in enacting relevant legislation and/or are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation».
Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK.
In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.
in english while maintaining its SEO structure and link types (dofollow or nofollow) exactly as they appear in
Victims of the loan charge received advice from professional accountants who were being paid to place them into tax avoidance schemes.
Sky News has seen evidence of chartered accountants advising their clients to enter loan arrangements, run by companies that were paying them a commission.
These schemes were later targeted by HMRC, and workers were hit with giant tax bills, sometimes hundreds of thousands of pounds.
Money blog: Value of a million homes rose 50% since COVID
In some cases, the tax demands have been crippling. It’s a campaign that has driven people to the brink of bankruptcy, devastated families and has been linked to 10 suicides.
MPs are now calling for a public investigation into the role of accountants and other professional bodies in the proliferation of these schemes.
An independent review of the loan charge is currently under way, but it is limited in its scope.
What is the loan charge scandal?
It is the latest revelation in a scandal that has caused untold misery for tens of thousands of people, who were enrolled into tax avoidance schemes, often against their knowledge.
They included contractors who were urged to avoid setting up limited companies and to instead receive payment through the schemes, which were meant to handle their pay and taxes.
Please use Chrome browser for a more accessible video player
Loan charge scandal ‘cover-up’
They worked by paying workers what were technically loans, instead of a salary. This allowed them to circumvent paying income tax. What many assumed were tax deductions on their payslips were, in fact, fees going towards the promoters of the schemes.
Tax avoidance is not illegal, but HMRC has successfully challenged tax avoidance schemes in the courts, and workers have subsequently been asked to pay the missing tax. There is no indication that these accountants violated the law.
Richard’s account
Richard Clancey feels that HMRC’s handling of the loan charge amounts to «state-sponsored bullying.»
After being offered a contract role in 2010, Mr. Clancey, now a retired computer services professional, sought the assistance of a chartered accountant in Kent to help him establish a limited company.
The accountant advised him to join a payment scheme instead.
Mr. Clancey stated, «He gave us an hour-long presentation on the advantages of the scheme and how it operated.»
«The presentation was very detailed and complex, and although I didn’t fully grasp it, I wanted to ensure my compliance with the law, so I trusted the accountant’s recommendation.»
The accountant informed him that he was receiving an initial fee but did not disclose ongoing payments.
In 2014, Mr. Clancey received an email from his accountant stating that he had received £257 in commission the previous year, although he had not received statements for the two previous years.
«Although you were previously informed of this commission, we are now required to disclose this amount to you as per the guidance of the Institute of Chartered Accountants of England and Wales,» the email read.
«This commission did not cost you anything,» it added.
The accountant’s former website explicitly mentioned offering commissions to accountants, boasting about increased rates.
At this point, Mr. Clancey was already under HMRC’s scrutiny.
In 2012, tax authorities informed him that he had participated in a tax avoidance scheme that «HMRC believes is ineffective,» and he was subsequently asked to pay over £100,000.
«Over the next seven years, I received numerous penalties and threats from HMRC, who claimed I was a tax avoider who needed to settle my debts immediately or face harsher consequences later,» he said.
«There hasn’t been a day when I haven’t been consumed by frustration and anger over my situation and how it came about… Since my involvement with [the scheme] and the subsequent harassment from HMRC and the government, a lot has changed. This state-sanctioned bullying has led me to experience some mental health issues.
«My personal stress levels were incredibly high. I dreaded receiving the next brown envelope in the mail with unreasonable, unfounded demands. My poor wife would apologize and burst into tears as she handed them to me.»
The loan charge has left many people facing financial ruin
HMRC stated that it prioritizes the well-being of all taxpayers. «We are dedicated to identifying and assisting customers who require additional support with their tax matters and have made significant improvements in this service over the past few years.»
Similar to others in his situation, Mr. Clancey is frustrated by the direct approach of the tax authority and the lack of accountability from other parties.
«I have become increasingly concerned that my chartered accountant led me into the hands of a fraudulent organization,» he said.
«HMRC continues to target victims.»
Government response
The government has initiated an independent review of the loan charge, and HMRC has paused its activities until the review is complete – focusing on helping individuals reach settlements.
The review will not investigate the historical involvement of accountants, promoters, and recruitment agencies, even though they supported the schemes.
HMRC
Politicians and advocates have called for a more extensive investigation.
Greg Smith, MP and co-chair of the Loan Charge and Taxpayer Fairness APPG, stated: «It is evident that many chartered accountants were directly involved in promoting loan schemes.
«People relied on accountants and had the right to trust this advice, yet are now facing bills that could ruin their lives.»
There needs to be a thorough investigation into this issue as part of an independent inquiry into the loan charge scandal,» he stated.
«Either HMRC warned accountants against recommending these schemes, in which case the accountants were providing reckless and potentially fraudulent advice, or HMRC failed to inform accountants against doing so, in which case HMRC themselves were seriously at fault.
«Either way, it is unfair that the current government only pursues those who took and followed professional advice and not those who provided it, all while profiting from such actions.»
Mr. Clancey’s faith in the financial sector has been severely damaged by this experience. «I will never again trust professional financial advice,» he declared.
«If the advice of a chartered accountant can cause this much harm without accountability, then there is a significant issue. It is a systemic failure within the tax industry that accredited professionals can, through their advice, ruin the lives of the individuals they advise.»
A spokesperson for the Institute of Chartered Accountants in England and Wales, an industry body, stated: «We expect chartered accountants to uphold the highest standards in all of their work, including tax.
«Stringent rules for members conducting tax work are outlined in standards that have been developed and reinforced to prevent members from engaging in aggressive tax avoidance.»
The organization strengthened its standards in 2017, following the announcement of the loan charge legislation, emphasizing that «members must not create, encourage, or promote tax planning arrangements or structures that aim to achieve results contrary to the clear intention of parliament in enacting relevant legislation and/or are highly artificial or highly contrived and seek to exploit loopholes within the relevant legislation.»
Anyone experiencing emotional distress or suicidal thoughts can contact Samaritans for assistance at 116 123 or email jo@samaritans.org in the UK.
In the US, individuals can call the Samaritans branch in their area or 1 (800) 273-TALK.
Victims of the loan charge sought advice from professional accountants who were incentivized to place them in tax avoidance schemes.
Sky News has obtained evidence of chartered accountants advising their clients to participate in loan arrangements facilitated by companies that were compensating them with a commission.
These schemes were later targeted by HMRC, resulting in workers facing substantial tax bills, sometimes totaling hundreds of thousands of pounds.
Money blog: Value of a million homes rose 50% since COVID
In certain instances, the tax liabilities have been financially crippling. This campaign has pushed people to the edge of financial ruin, destroyed families, and tragically led to 10 suicides. MPs are now calling for a public investigation into the involvement of accountants and other professional bodies in promoting these schemes. While an independent review of the loan charge is currently underway, its scope is limited.
The loan charge scandal is the latest development in a scandal that has caused immense suffering for thousands of individuals who unknowingly participated in tax avoidance schemes. These schemes advised contractors to receive payments through loan arrangements rather than setting up limited companies, allowing them to evade paying income tax. However, what appeared to be tax deductions on payslips were actually fees going to scheme promoters.
Richard Clancey, a retired computer services professional, described HMRC’s handling of the loan charge as «state-sponsored bullying.» He was convinced by a chartered accountant to join a payment scheme instead of setting up a limited company. Despite receiving some commission notifications, he was unaware of ongoing payments. It was only later that he learned about the full extent of the scheme’s operations.
As the scandal unfolded, Mr. Clancey found himself under HMRC’s scrutiny as they identified the tax avoidance scheme he had been involved in as ineffective. He was subsequently asked to pay over £100,000.
«Over the next seven years, I received multiple penalties and threats from HMRC who said I had been a tax avoider who should settle their debts now or face worse consequences later,» he said.
«There hasn’t been a single day when I haven’t been consumed by the frustration and anger of my situation and how it arose… Since my involvement with [the scheme] and the subsequent hounding from HMRC and government, a lot of that has changed. This state-sponsored bullying has caused me to suffer some mental health issues.
«My personal stress levels were through the roof. I dreaded the next brown envelope coming through the post box with outrageous, unsubstantiated demands. My poor wife would apologize and burst into tears as she brought these to me.»
HMRC said it takes the wellbeing of all taxpayers seriously. «We are committed to identifying and supporting customers who need extra help with their tax affairs and have made significant improvements to this service over the last few years.»
Like others in his position, Mr Clancey is frustrated by the blunt approach of the tax authority and the lack of accountability from other parties.
«I have been increasingly concerned that my chartered accountant led me into the hands of a scam organization,» he said.
«HMRC continues to persecute victims.»
Government reaction
The government has now launched an independent review into the loan charge, and HMRC is pausing its activity until that review is complete – but its focus is on helping people to reach a settlement.
The review will not look at the historical role of accountants, promoters, and recruitment agencies, even though they propped up the schemes.
Politicians and campaigners have called for a broader investigation.
Greg Smith, MP and co-chair of the Loan Charge and Taxpayer Fairness APPG, said: «It’s clear that many chartered accountants were directly involved in the promotion of loan schemes.
«People trusted accountants and had the right to rely on this advice, and yet, instead, are facing life-ruining bills. There needs to be a proper investigation into this as part of an independent inquiry into the loan charge scandal,» he said.
«Either HMRC warned accountants not to recommend these schemes, in which case the accountants were giving reckless and potentially fraudulent advice; or HMRC didn’t tell accountants not to do this, in which case HMRC themselves were seriously at fault.
«Either way, it is quite wrong that the current government continues to only pursue those who took and followed professional advice and not those who gave it, whilst profiting from doing so.»
The experience has damaged Mr Clancey’s faith in the sector. «I will never again trust professional financial advice,» he said.
«If the advice of a chartered accountant can cause this much damage without culpability, then there is something very wrong. It is a failure on the part of the entire tax industry that accredited professionals can, through their advice, destroy the lives of the individuals that they advise.»
A spokesperson for the Institute of Chartered Accountants in England and Wales, an industry body, said: «We expect chartered accountants to adhere to the highest standards in all of their work, including tax.
«Robust rules for members performing tax work are contained in standards which have been developed and strengthened to prevent the involvement of members in aggressive tax avoidance.»
The organization strengthened its standards in 2017, after the loan charge legislation was announced, adding that «members must not create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of parliament in enacting relevant legislation and/or are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.»
Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK.
In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.
SOURCE
