More than two thirds (69%) of UK contractors say that HMRC’s retrospective loan charge is having a detrimental effect on their mental health, according to a new report.
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. Recent HMRC legislation means that those who were paid in this way are being asked to either retrospectively pay the loans or pay tax on it. From Friday 5 April, at least 50,000 contractors who avoided national insurance and income tax by using schemes that paid them mostly in loans will face the charge.
The report conducted by ContractorUK, a leading contractor website, found that over a third (38%) have suffered from stress with regards to these retrospective loan charges. The main reason cited was the excessive amount that they were expected to pay (24%).
Other reasons included not knowing how much they will be expected to pay due to lack of communication from HMRC (23%), and not being able to pay the full amount they are being asked to pay (20%). Over a fifth of respondents (21%) also said that they fear they will have their homes repossessed should the loan charge be enforced.
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.
Anthony Sherick MD of ContractorUK commented on the findings, “Contractors are vital to the success of the UK workforce. 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. HMRC needs to firstly clarify their position on the Loan Charge and secondly seriously reconsider their course of action as 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.”