Can’t pay, shouldn’t pay

You probably haven’t heard of the loan charge. I hadn’t until a couple of months ago, when I told listeners to my LBC radio show that I would soon be interviewing Mel Stride, the financial secretary to the Treasury. Following this, I was bombarded by texts and emails from something called the Loan Charge Action Group and its many, many sympathisers. I then became acquainted with what might be the next storm to hit the government.

The messages, many of them emotional and some borderline aggressive, told the same story: hundreds of what politicians like to call ‘hardworking families’ were facing unpayable and unjust tax bills as a result of a Treasury U-turn on what previously had been a perfectly legal tax scheme. Freelancers and contractors had been allowed to be paid through an employee benefit trust; the payment was via ‘loans’ that were never repaid. An odd arrangement, to be sure, but it was once accepted and promoted as a legitimate way for the self-employed to reduce income tax. Now, it has been declared a form of tax evasion, and the authorities are seeking to claw back 20 years of what are being regarded as missed payments.

What’s going on? How could this be justified? When I put questions to Mr Stride in my studio, I found him decent and affable, but he provided answers that were entirely unconvincing. It’s not at all clear that the government expected its sudden tax demands to have such an effect. Many self-employed traders are now looking for answers from those who advised them to use these vehicles, based on written guarantees from HMRC that they were legal. But the authorities don’t care if anyone was wrongly advised: they want the money.