HMRC retrospective loan charge causing problems for contractors
ContractorUK’s report has revealed some interesting insights
In a report recently released by ContractorUK, it was revealed that 69% of UK contractors have admitted that HMRC’s retrospective loan charge is having a detrimental effect on their mental health.
“The loan charge relates to disguised remuneration schemes, whereby workers were paid via loans rather than salary, and, as a result, did not pay income tax on their earnings,” ContractorUK explained.
“This recent HMRC legislation now means that people paid in this way are being asked to either “retrospectively pay the loans or pay tax on it.”
Hitting those contractors that took loans out in good faith is deeply unfair and is affecting their mental health, which is simply unacceptable.”
From Friday 5 April, the 50,000 contractors who previously avoided NI and income tax using schemes that paid them largely in loans will now face charges.
ContractorUK said: “While contractors are expected to pay the full amount, the companies that advertised these loans will receive no penalty. Over half (56%) feel that these companies should, at least in part, pay the charges contractors have been faced with.”
Some of the results from the survey are as follows:
- Respondents suffered from stress surrounding retrospective loan charges: 38%
- Respondents concerned about the excessive amount HMRC expected them to pay: 24%
- Respondents they did not know how much they would be expected to pay due to a lack of communication from HMRC: 23%
- Respondents concerned they would not be able to pay the full amount asked of them: 20%
- Respondents fear they will have homes repossessed, should the loan charge be enforced: 21%
“Contractors are vital to the success of the UK workforce,” said Anthony Sherick, managing director at ContractorUK.
“The current plan will potentially put people out of their homes and, worse than that, the loan charge has been allegedly linked to a number of reported suicides.”
“They fill knowledge gaps in companies and for projects, not just in the UK, but also abroad. Hitting those contractors that took loans out in good faith is deeply unfair and is affecting their mental health, which is simply unacceptable.”
He continued: “HMRC needs to firstly clarify their position on the loan charge, and, secondly, seriously reconsider their course of action.”
“The current plan will potentially put people out of their homes and, worse than that, the loan charge has been allegedly linked to a number of reported suicides,” Sherick concluded. While the suggestion of an increase in the number of suicides is purely alleged, it is undeniable that pressure from HMRC is causing significant strain for a sector already struggling in this current climate.