Devastating Financial Reality of the Loan Charge

Results from latest research by the Loan Charge APPG (All Party Parliamentary Group) show that most people cannot pay, the vast majority were mis-sold schemes, and many have subsequently lost income due to off-payroll rules and the pandemic.  Between 16 April 2021 and 24 April 2021, 1,109 people participated in the survey, of which 78% have a Loan Charge liability – 11% are uncertain and 11% have ‘settled’.

Devastating Financial Reality of the Loan Charge
  • 75% of respondents say bankruptcy will be inevitable to them if HMRC enforces the loan charge, with 84% saying that this will directly impact their future work prospects.
  • More than three-quarters (77%) of respondents are endangered of relying on State benefits because of their loan charge situation, with 38% expecting immediate dependence on benefits and the remainder foreseeing this closer to retirement.
  • More than half (55%) of respondents expect having to sell their primary residence and/or having to release their equity (63%).
  • More than eight in ten (82%) would need to borrow substantial amounts to repay the loan charge and eight in ten (70%) would need to use their pension to either pay the LC
    specifically or debt incurred as a result of the loan charge.
  • An overwhelming majority (88%) would not be able to afford a Time to Pay (TTP) arrangement of less than 3 years and would require an individual arrangement with HMRC.
  • If respondents were asked to repay the loan charge in instalments, almost half (46%) of the respondents would see a net income reduction of up to 50%, 29% would see a reduction between 50-100% and a substantial 25% of respondents would see their net monthly income reduced by more than 100%.

An overwhelming majority of respondents (99%) were told that the arrangements were legitimate / compliant when they entered those schemes.  Only a tiny minority of people had the risks to them explained either partially (6%) or fully (1%) whereas a vast majority (93%) did not have the risks explained to them at all.

The full report is here, and is worth reading to understand the full impact on individuals and their families.  HMRC are effectively asking 22% to pay over 100% of their net monthly income if they were to pay in instalments; 64% are unable to pay if HMRC demand full and immediate payment on their liability and will go bankrupt immediately.   Disturbingly, the research shows that HMRC only communicated to a mere 30% of participants the details of their supposed Loan Charge ‘liability’.

The affordability issue alone is enough to cause immense stress and anxiety, and those affected are now devastated, psychologically as much as they are financially.  And yet the injustice continues, despite HMRC themselves not having legal backing for their own policy.

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