William had just come back from holiday with his family when he found out his older brother Michael, a power station engineer in his mid-forties, was not in a good way. He raced over to his house to find him in a "horrendous" state, dealing with severe anxiety and depression. "The way I would describe it is like sheer terror, minute by minute, he didn’t get any respite from it," William told BuzzFeed News.
Michael, a father of two children, had not eaten or slept properly for weeks, and that night his brother climbed into bed with him for the first time in over 30 years. "I cuddled him, but there was no comforting him. He was highly distressed," William said. Less than three months later, at the end of September 2019, Michael killed himself. His family believes he was the seventh suicide victim of the government’s loan charge.
While Brexit has dominated politics and Parliament over the last three years, the impact of the loan charge — which has seen thousands of contractors who were once paid via loan schemes handed crippling tax demands years later — has been largely unnoticed by the outside world.
But anger is building: More than 200 MPs from all parties, including many senior Conservatives, are now calling on the government to suspend the policy — warning that the tax is "retrospective" and goes against the rule of law. An independent review led by Sir Amyas Morse, the former chief executive of the National Audit Office, is due to report next month.
BuzzFeed News has spoken to the devastated families of two men who killed themselves after facing loan charge demands from HMRC and seen the impact statements from over 100 workers who warn of bankruptcy, marriage breakdowns, and deep anxiety over their children’s futures as a result of the loan charge.
HMRC estimates that around 50,000 people — including business and IT workers, engineers, social workers, nurses, and locum doctors — were involved in so-called disguised remuneration schemes. Campaigners say around 100,000 people are affected.
Under the scheme, a worker’s pay was diverted to an offshore trust, which gave the worker a loan that was typically not repaid. The government says this allowed people to sidestep large amounts of tax and national insurance.
In a fresh crackdown on alleged tax avoidance in 2016, then-chancellor George Osborne gave HMRC the power to recoup tax from workers who had used these schemes, going back 20 years. This became law in the 2017 Finance Act — but critics say it received very little scrutiny in Parliament at the time.
Last year, contractors were sent letters telling them to add up all their loans from trusts since 1999 and make an offer to settle the tax that HMRC claimed should have been paid. For many, this was the first time they were told they had done something wrong.
Those who failed to agree to a settlement now face the loan charge: effectively the total of tax-free loans received over the past two decades, taxed as income all in one year, 2018–19.
The average sum owed is around £120,000, according to the Loan Charge Action Group, a grassroots group set up by affected freelancers. HMRC disputes this, saying the median figure is £13,000.
Government ministers have been at pains to describe people who used the loan schemes as serial tax avoiders who enjoyed luxurious lifestyles off the back of law-abiding taxpayers. But the reality is far more complex: Many workers were assured by accountants at the time that what they were doing was legal and submitted tax returns year after year with no comeback from HMRC.
Many contractors also deny they were seeking to avoid tax but were trying to get around complicated legislation known as IR35, which attempted to class many freelancers as employees. They say they were advised that it was too risky to set up their own limited company so instead signed up with an umbrella company in order to be tax-compliant.
A number of organisations, including some government departments and councils, paid workers via these loan schemes, and in some cases, contractors were told they had to use them in order to keep their job.
"The people who use these schemes vary dramatically," said Liberal Democrat MP Ed Davey, chair of the loan charge all-party parliamentary group (APPG). "I am sure there are a few people who thought 'This is pretty good, I’m going to save loads of money', there are bound to be people like that, let’s not be naive.
"But there are clearly lots of people — and I would even say it’s probably the majority — who took professional advice and were reassured by tax advisers and different promoters of these schemes that these were HMRC-compliant and thought they were just doing it in the normal way."
William said it was when he found Michael in a "tortured state" that he first heard about the loan charge, which for his brother totalled around £40,000. "This was a retrospective charge from HMRC for a couple of years’ work he’d done a number of years back — he was no longer in that scheme," he said. We have changed their names at the family’s request.
Michael, who worked in power plants across the world, had been advised by his employer at the time to go through a loan scheme, according to his brother: "He’s not a tax adviser. He’s a simple contractor. He took the advice, then all this came back to bite him."
Michael’s elderly parents were ready to step in and use their savings to pay for his tax bill. But his mental health continued to deteriorate, and he was admitted to hospital for around two weeks over the summer. He began to worry he would never be able to get work again given his fragile mental state.
"Michael believed he was going to lose everything, his house, his relationship, the biggest thing for him was ensuring that his kids were OK," William said. "He was so terrorised, so anxious, it was chronic — the rational part of his brain was no longer working. He wouldn’t have ended up on the street, we knew all this, but he believed firmly that it was going to happen and he could not see a way out."
Michael spent the next two months being cared for by his parents, his girlfriend, and his brother as he struggled with intense anxiety. On the last day William saw him alive, Michael was visited by an NHS mental health crisis team who said they had a bed in a psychiatric ward for him again. He "took fright" at this and fled the house. Police found his body nearby the next day.
William said his brother had depression earlier in life but never before on this scale. "The loan charge triggered this, that’s what sent him down this spiral. The loan charge took my brother’s life — he was a father, a son, an uncle, a partner: It has essentially destroyed our family.
"He was a law-abiding citizen, he was very particular in making sure all his tax affairs were correct, bills were paid on time, he was almost OCD [obsessive compulsive disorder] with this stuff. He had no idea what he’d got himself into, no idea. He was told, ‘This is the way you’re going to be paid, it’s all above board, it’s cleared with the tax authorities, there’s nothing to worry about’, and he naively took that at face value."
MPs on the loan charge APPG wrote to Amyas Morse at the beginning of October informing him of Michael’s death. "This is the seventh suicide of someone facing the loan charge that has been reported to and confirmed to the loan charge APPG," they said.
"As you know, when we met with you last week, we handed you, in confidence, the information regarding the previous six suicides that have been reported to us."
The APPG said HMRC and the Treasury had been warned about the "serious suicide risk from the loan charge consistently since June last year" but had failed to listen.
An HMRC spokesperson told BuzzFeed News they were aware of four suicides that may have a connection with the loan charge. They were all referred to the Independent Office for Police Conduct, and three cases have been returned to HMRC.
"We know that facing a large tax bill can be stressful, and our teams will make sure that anyone who genuinely needs extra help gets the support they need," the spokesperson said. "If people are worried about being able to pay the loan charge, they should get in touch with HMRC as soon as possible."
Keith Gordon, a barrister at Temple Tax Chambers who has long called on the government to suspend the loan charge, told BuzzFeed News it was "an affront to a country that claims to respect the rule of law".
He said there were three basic reasons the policy was unfair: that it cut across the "statutory safeguards" of time limits in tax legislation, that most people affected by the loan charge had "little choice or awareness" of their actions, and that HMRC themselves were largely responsible for the build-up of tax arrears.
"All this just reminds people how incompetent HMRC had been since 1999," Gordon said. "HMRC are just proceeding on the basis 'it’s not our fault, we’ll blame someone else'.
"Most of the people affected by the loan charge aren’t deliberate tax avoiders but were people who had little choice or awareness of what they were doing — they weren’t the most egregious or culpable of people. But HMRC saw them as easy pickings."
Impact statements put together by the Loan Charge Action Group for meetings with government officials last year reveal the harrowing effects the tax policy has had on people across the country. We have kept the quotes anonymous to protect their identities.
- "I feel the stress and continuous strain of this situation everyday. It’s the first thing I think about in the morning and the last thing I think about when I go to bed. My life no longer has any joy whatsoever."
- "The feeling of being in purgatory and not being able to plan for the future leaves a general feeling of hopelessness ... The effect has at times had me considering taking my own life. The only alternatives are a 20+ year 'slave contract' to repay HMRC if that was accepted ... or become insolvent."
- "Financially I am ruined but worse than that my mental wellbeing is taking a real pounding. My stress levels are permanently dialled up to 11. The 2019 loan charge is seeping into every area of my life, I am consumed by it. I find it difficult to concentrate on anything else; it keeps me awake at night and infiltrates my dreams when I eventually manage to drop off. I am exhausted. I cannot take much more of this."
- "Now my life is on hold with the 2019 loan charge … It was a big decision point that I won't have a kid and family because I'm too worried that I won't be able to provide for my child, now I'm over 40 and getting more and more over the line to conceive a healthy child … because of bad advice I could lose my property as well my entire life savings and I will never have my own family."
- "I don’t understand how there can be retrospective change in this type of law, I just don’t get it, where does it stop: are they going to retrospectively change the speed limit in my street and ban me from driving over that limit last week?"
- "Feel lied to and ashamed I was so gullible. But also angry that HMRC have allowed scheme providers to exist and prey on people like me."
- "I have suffered deep depression with the uncertainty and been offered no reasonable settlement figures from HMRC via my accountant... I have had suicidal thoughts and even separated from my wife due to the stress and unjust treatment this loan charge has brought."
- "Since finding out that my liability is £125,000 to £170,000 I’ve had many, many sleepless nights, I suffer from stress and it is now at a level that it’s impacting my work… It’s hard to hide how I feel from my wife and more importantly my kids as I don’t want them to be impacted or worried about the future. I have thought in the past that my kids would be much better off if I was to jump in front of a train as this is one way to avoid the charge, plus life insurance would pay off the house and give a nice lump sum."
- "I am not a yacht-owning millionaire, but a normal bloke trying to make a living to support his family (and as a result, not relying on the state to pay my way). I will never get payback for those sleepless nights; having a short temper with my children when stressed by this; fear of the next knock on the door."
Some of those who submitted impact statements pointed to HMRC’s policy paper on the issue, published November 2017, which said, "This package is not expected to have a material impact on family formation, stability or breakdown."
Gayle, who did not want us to publish her family name, told BuzzFeed News how her father killed himself in November 2018, leaving a long letter outlining his "shame" over the loan charge.
He was a consultant engineer in his late sixties who was informed of the loan charge, thought to be around £50,000, just as he was about to retire.
Gayle, who has four children of her own, said her father did not like to speak about it, but over time, she and her sister became aware of what he called a "tax thing" that was causing him great concern. Eventually, he stopped going out, lost a lot of weight, and was sleeping only two to three hours a night.
"He would not do anything until it was sorted. He said, 'It’s hanging over me, I need to sort it, I’m so stupid', and we were like 'You’re not' and we didn’t realise the scale of the problem," said Gayle.
"He thought of himself as a criminal. He mentioned once 'I might go to prison' and we said, 'Oh my god, don’t be ridiculous, come on, Dad' … and then in his letter, he spoke about prison a lot.
"We’ve been told since he would never have gone to prison, but Dad truly believed that — that was a very big part of his letter, that he felt like he was a criminal and the shame, the shame that came across, the shame he brought on the family. And there was never any self-pity, he didn’t want sympathy, he’d got himself into this mess."
Gayle said her father had no history of mental illness, but the impact of the loan charge sent him into a dark place. It was not the money, she said, but the understanding that he had broken the law.
Before he died, he set out all his tax paperwork on his kitchen table, ready for his family to find. "When we think of him passing, we automatically think of the loan charge; it’s linked, that’s why he’s done it," she said.
"In time you have to move forward, but I can’t move forward at all, I don’t feel like I can grieve because you just want to close that case. That was my promise, me and my sister’s, we will resolve it for him."
Gayle only found about the Loan Charge Action Group following her father’s death, when she was desperately trying to understand more about the tax policy. "If only he could have seen all the impact statements, to know he wasn’t alone," she says.
She said her heart broke when she learned of the latest suicide, that of Michael, last week.
"It really cuts deep," she said. "You think, 'Did they have children? How were they feeling?' We would never know what Dad was going through if he hadn’t written his letter, he was so brave.
"There are things that I’ll never know like, was he crying? But we have something that gives us answers and we can share our story to try and help others.
"I would like peace. I would like to resolve this for Dad, but I also absolutely want to fight for all those people and give what we can to help stop it for them. If my dad was still alive and struggling, then maybe someone would do that for him."
In the House of Commons in early October, chancellor Sajid Javid and Treasury minister Jesse Norman were accosted by MPs from all sides calling on them to suspend the loan charge in the wake of the suicides.
Tory MP David Davis, the former shadow home secretary, said, "The hard fact is that seven people facing challenge or investigation for the loan charge have taken their own lives."
He hit out at the "historical incompetence of HMRC" and the "subsequent willingness of ministers to use retrospective taxation". Independent MP Dominic Grieve, the former attorney general, agreed that "the retrospectivity is deeply questionable".
Norman insisted: "The legislation is not retrospective." MPs shouted back from their benches: "It is!"
An HMRC spokesperson also rejected the term, saying: "It is a new charge on disguised remuneration loan balances that were still outstanding on 5 April 2019. It doesn’t change the tax position of any previous year, or the outcome of any open compliance checks."
In response to calls for a suspension, they added, "In line with current legislation, the loan charge will remain in force whilst we await the outcome of the review."
Ed Davey believes the government is fundamentally wrong. "I just think the way HMRC have behaved here is absolutely shocking,” he said. "Some people are nervous about making the case for tax avoiders and, if I'm honest, I was originally. I don’t like tax avoidance, I think they were right to close this loophole.
"But there is a principle in the tax system, in our law — the rule of law says you can’t have tax law that everyone thought was the tax law in 2000 change in 2019, otherwise you are changing it retrospectively.
"The way they do it is say they’re not taxing the income, they’re taxing the loan and because these loans are outstanding and exist today in theory, therefore they can tax them today. This arcane argument doesn’t hold up when you start examining it."
Davey and his APPG have taken evidence from many people affected by the loan charge, which has fed into Amyas Morse’s independent review.
"The extent of the hardship and fear that I’ve seen is like I’ve never witnessed before," Davey said. "If they’d implemented this and said from now on, this loan charge applies, there would be no issue at all. But to apply it backwards, change the law, and try and make out this is what the law already was, it’s just appalling."
Anne Milton, independent MP for Guildford and a former Tory minister, told BuzzFeed News the loan charge was having a "very real impact" on families in her constituency.
"These people followed advice and did not think they were doing anything untoward at the time and are now being chased retrospectively," she said. "It would be a reassuring step forward if the government agreed to suspend loan charge related payments to HMRC while the review takes place."
There are also major questions about the actions of companies who promoted the loan schemes; campaigners believe they are being let off the hook while ordinary people suffer the consequences.
As prime minister Boris Johnson himself said, when he was running for the Conservative leadership in June: "The real culprits in this matter, if I may say so, are not so much the individuals themselves who have decided to use the loan charge as a way of minimising their tax exposure. It's the people who advised them that that was a sensible thing to do...
"They [the individuals] were encouraged to do it and they were told it was an acceptable thing to do. It seems superficially unjust to me that they should then be retrospectively pursued for what they were told was an entirely legal option."
Norman told MPs that such companies "often operate offshore and it is extremely difficult to close them down when they are constantly mutating from one company to another".
An HMRC spokesperson said they had been investigating more than 100 promoters of tax avoidance schemes, including those who promoted "disguised remuneration schemes", and dozens had been shut down for good. In May 2019, six people were arrested on suspicion of promoting fraudulent methods to attempt to circumvent the loan charge, the spokesperson added.
Steve Packham, who represents the Loan Charge Action Group, said: "Despite the welcome fact that there is a review underway, which we hope is a genuine one, there are still thousands of British families facing huge anxiety of the possibility of losing homes and livelihoods due to the draconian loan charge.
"It's absolutely scandalous that despite seven known suicides, the Treasury is refusing to suspend all related activity, which puts more lives at risk. With over 200 MPs demanding this, it’s time ministers acted. If they continue to ignore this, then they will be culpable for any more tragedies."
William hopes he can raise awareness of the situation by telling his brother Michael’s story. "He was a pain in the butt when we were kids, but as he grew up, he was very inspirational and he touched so many people’s lives," he said.
"The amount of people who have since told me he changed the course of their life, helped them out big time. It's been quite overwhelming."
He fears there are more people out there affected by the loan charge who are suffering in silence. “I think we’re just at the tip of the iceberg,” he said. ●
International suicide helplines can be found at befrienders.org. You can text SHOUT to 85258 in the UK for free anonymous 24/7 crisis support from Shout, an affiliate of Crisis Text Line. And you can text TALK to 741741 in the US to reach the Crisis Text Line. The US National Suicide Prevention Lifeline is 1-800-273-8255.