Julia Irvine 20 May 2019 01:58pm

Six arrested over loan charge schemes

Six people have been arrested over the promotion of fraudulent schemes designed to get round paying the loan charge

Fifty HMRC officers also raided business premises and residential addresses in London, Guildford, Stevenage, Stratford-upon-Avon, Sevenoaks and Tonbridge, taking away computers and business and personal records.

HMRC’s action started on 10 May when two people were arrested on suspicion of promoting a scheme that allowed individuals to fraudulently evade paying taxes.

Four days later, the other four were arrested in connection with a separate scheme on suspicion of using fraudulent methods to circumvent the loan charge and the taxes due. HMRC said they were also suspected of enabling others to do the same.

All six were questioned by HMRC officers and were released pending completion of the investigations.

“We strongly encourage people not to use loan-busting schemes and methods,” an HMRC spokesperson warned afterwards.

“They clearly don’t work and people run the risk of losing more money and being involved in fraud. As we always say – if it looks too good to be true, then undoubtedly it is.”

The controversial loan charge came into effect on 6 April and applies to anyone who used so-called disguised remuneration schemes. The legislation added a 45% non-refundable charge on all loans advanced through the schemes, some of them dating back to 20 years ago, unless the individual had agreed with HMRC to settle their tax affairs by midnight on 5 April.

However, many of the 50,000 people caught up in the issue are low paid people, such as nurses and social workers, who were persuaded by their employers to join the schemes. Many of them are facing bankruptcy and one person has committed suicide as a direct result. Yet, at the time the schemes were set up, HMRC did not question their legitimacy.

A number of MPs took up their cause but pleas to defer the loan charge introduction until an independent review had been held fell on deaf ears.

A Treasury review of the campaign confirmed that the government would be sticking to its guns and implementing the charge on schedule.

Announcing the decision at the end of March, Treasury financial secretary Mel Stride described disguised remuneration schemes as “an aggressive and contrived form of tax avoidance” that most people wouldn’t go near. “Many contractors,” he added, “looked at these arrangements, were appalled and ran a mile.”

Meanwhile, for the past couple of years HMRC has been warning people affected by the loan charge against trying to reduce their tax bills by using contractor arrangements claiming to get around it. Indeed, just 10 days before the loan charge became operational, the tax authority highlighted a number of schemes being marketed which claimed to avoid it by transferring ownership of shares in a personal service company.

“HMRC’s strong view is that these arrangements or similar ones do not work and we will tackle the promoters and users of these arrangements,” it said, adding that anyone using the arrangements would still face the loan charge plus, potentially, an additional significant penalty.

The government estimates that it will claw back an extra £3.2bn over the next five years from employers and employees caught up in disguised remuneration schemes. So far, HMRC has settled some 6,000 cases, receiving around £1bn of which 85% has come from employers.