Labour to review controversial tax crackdown on the self-employed

Rachel Reeves says HMRC’s treatment of those facing a charge is ‘not acceptable’

Labour would review a controversial tax crackdown on freelancers and agency workers that has been linked to 10 suicides. 
Rachel Reeves has said a new Labour government would carry out a new and independent review of HM Revenue & Customs’ “loan charge” – a tax charge levied against some 60,000 workers including nurses, teachers and IT contractors accused of dodging tax via complex avoidance schemes.
The charge relates to schemes dating back to the early 1990s which involved paying workers salaries via loans instead of normal wage bills, which meant they avoided paying income tax and National Insurance. Those subject to the charge face paying back all the tax avoided in one go with bills for some running into six figures.
The tax office insists the schemes were always illegitimate, but those affected claim they were led into the arrangements, which they say were widely promoted as legitimate at the time. 
Last month MPs debating in the House of Commons said the loan charge was the “next Horizon scandal”, pointing to the fact it had been officially linked to at least 10 suicides, more than the four suicides linked to the subpostmastaers saga brought into the limeluight by the ITV drama Mr Bates Vs The Post Office. 
The shadow chancellor said that the tax office was chasing up vast sums that most people did not have to hand. 
“We are not talking about the biggest earners here,” Ms Reeves said in an LBC radio interview with Iain Dale on Monday.
“We are talking about ordinary people on ordinary wages but were contractors and were encouraged by their accountants to participate in these schemes.” 
She added Labour was pressing the Government to review the cases and to ensure that HMRC was more proportionate and did not pursue people who could not afford to pay. 
“HMRC seem to be coming after the people who were mis-sold these products rather than the people who were mis-selling them and that is the real scandal,” she said.
She said a government review into the loan charge known as “the Morse review”, commissioned in 2019, was “clearly not good enough” and said “the way people are being treated is not acceptable”.
She said that if Labour won the upcoming general election, it would launch its own independent review into the charge.
Nigel Huddleston, financial secretary to the Treasury, told MPs last month he did not think a case had been made for another review and that the Government had already accepted a number of recommendations made by Baron Morse of the National Audit Office, including that the charge should be repealed for loans made before 2010.
An HMRC spokesman said: “We never forget that there’s a human story behind every unpaid tax bill and we take the wellbeing of all taxpayers very seriously.
“We recognise that dealing with large tax liabilities can lead to pressure on individuals and we are committed to identifying and supporting customers who need extra help with their tax liabilities, and we have made significant improvements to this service over the last few years.
“HMRC has support in place to help customers who have used a tax avoidance scheme to settle their use. This includes paying by instalments in a Time to Pay Arrangement. The arrangement we agree will be based on what the taxpayer can afford and there’s no upper limit over how long we can potentially spread payments. 
“Our message to anyone who is worried about paying what they owe is: please contact us as soon as possible to talk about your options.”