Taxes, we are told, are required in order to fund the sort of society that we wish to live in.
We all like to live in a democracy. We may not like everything about it, but of the systems available, it suits us in the UK. The bedrock there of course is that those elected by a “majority” should hold the reins of power and decide policy.
Are we though comfortable with that when those in the minority are pushed to financial and emotional distress and potentially worse?
Why then are the majority, as represented by our political classes, prepared to see that minority pushed into purgatory?
Despite more than 2 years of asking this question of that majority, I still don’t know.
We all welcome moves by our tax collecting agencies to reduce or remove abuse and avoidance and evasion. We may wish that the process was more transparent or that the biggest corporations shouldered more of the burden or that the money is not spent on things we don’t like, but most people accept that taxes are needed.
As the tax burden increases, Government becomes more anxious to explain why this increase or that removal of relief is needed and what effect it has. Each Budget is laden with hundreds of pages of statistics and charts and projections.
Impact on individuals, households and families
This package is not expected to have a material impact on family formation, stability or breakdown.
Some of these individuals will be unable to repay the loans, agree a settlement with HMRC before 5 April 2019, or pay the loan charge arising on 5 April 2019. The government anticipates that some of these individuals will become insolvent as a result.
The accompanying estimate of financial effect is that some £2.53 billion will be collected from “Tackling historic and new schemes” from 40,000 people and that £820m will be collected from 10,000 who would be re-designated as employees from self employment.
Let’s think about that. The tax take from the first above, based on a retrospective tax charge, is £63,250 PER PERSON. Those redesignated to employee are to contribute £82,000 EACH.
In reality, the distribution of that tax take from the population is very uneven. Many would owe much smaller amounts. The majority would though owe much more. Looking at our own data, most would be looking at £100,000 or more.
Could you find those funds at short (or long) notice? Most of us would struggle.
The reality is that a substantial proportion of our client base would be facing insolvency. Perhaps as many as 40%. Not only would that make a mockery of the figures suggested in the impact statement (although I doubt that the HMRC putting the forecast together would be blamed) but the permanent damage to the economy as skills are lost is many times this cost.
The number of people said to be targeted by this measure is debatable. Soon after the end of this month we will be asking via a FOI request how many contractors have registered for the present settlement offer. There are wild rumours being traded right now, but all of them more than 40,000. If the number registered is high, does this not indicate that the basis of the impact assessment is wrong?
If the number impacted is say 100,000 and 40% go insolvent, that is around twice the number of individual insolvencies in the last quarter.
That is 40,000 whose earning capacity, savings, careers, pensions and assets are shattered. Is the benefit to the majority worth that cost?
Each of those 40,000 and the same number again who would perhaps avoid insolvency but struggle for years, has dependents. Spouses, children, parents, family. They will largely rely upon the highly skilled and well paid individual who has always provided for them.
If each of our impacted population had just over one dependent, we’re looking at 200,000 lives which are at risk of being changed – forever.
The strain this is putting upon those most immediately in the firing line is enormous. We can relate stories from our clients of marriage breakdown, ill health, stays in mental health facilities, depression, suicide attempts. Two days before Christmas last year I forced a client who was making public threats to take his own life, in to see me. He is still with us but remains fragile. He is not a one off.
Is collecting an amount of money, any amount of money, worth the personal cost that is so easily dismissed in HMRC’s impact assessment?
Do the rights of the majority mean that 200,000 people can be cast into a nightmare in which family formation and stability will be absolutely at risk and not “some” but tens of thousands of individuals will be bankrupt and claiming benefits?
There are answers here that will prevent this happening without letting individuals “get away with it”. There are fair ways to resolve this and certainly all of our clients would welcome that, indeed are desperate for that answer. I’ll not detail those here other than to say that HMRC has consistently rejected them for three years.
What I would say is that our MPs and those in HMRC with the authority should look again at this situation and understand the human impact. If they are not prepared to allow some common humanity to overcome dogma and blind obedience to statistics, frankly I hope they struggle to sleep at night.
This disaster will happen unless it is prevented and it can easily be stopped.
It’s time for our democracy to show it cares for everybody.
Graham Webber, WTT Consulting