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Take out loans to cover tax debts, HMRC says

Take out loans to cover tax debts, HMRC says

People owing money to HMRC have been told by the tax authority to take out personal loans to cover their debt.

According to an article by Telegraph Money, HMRC has written to those affected saying they should make every effort to pay, including selling assets or taking out a commercial loan.

It's yet another example of the tax authority’s dogmatic and aggressive approach towards tax payers. The Finance Bill Sub-Committee – charged with reviewing the draft Finance Bill 2018 – is already investigating the “substantial evidence [it] received alleging abuse and inappropriate use of HMRC powers.”

A history of aggressive HMRC debt collection

Added to that, a report published in September by the National Audit Office (NAO) warned that government departments and local authorities often pursue debt more quickly and aggressively than is appropriate.

“HM Treasury has limited information on debt…and, as such, does not fully understand the problem, which hinders its ability to respond effectively,” NAO said. “The information available is much less clear and transparent than retail lending information.”

Best practices ignored

According to NAO, the government lags behind the retail lending sector in following good debt management practice. For example, established best practice in how to assess affordability of repayments is used by only one in five local authorities. It is also not used as standard by central government creditors.

NAO said that short-term incentives and funding pressures is leading HMRC to pursue debts “too quickly and aggressively.” Intimidating actions and additional charges are 15-29% more likely to make debts harder to manage or increase anxiety and depression.

“These people are in that position because of financial difficulty and HMRC knows that,” Phil Manley, of tax advisory firm DSW Tax Resolution, said to Telegraph Money. “Asking them to take out more debt is effectively destroying their finances.”

Hypocritical approach, irony missed or ignored

Peter Tutton, policy director at debt charity StepChange, added: “On the one hand, government acknowledges the vital need to support people in financial difficulty, yet on the other it is local authorities and government departments themselves which are currently lagging behind the private sector in terms of forbearance and a willingness to accept long-term repayment strategies.”

Among those being hounded by HMRC are 50,000 contractors, who face huge charges on unpaid taxes dating back as far as 20 years. This is as a result of their involvement in tax avoidance schemes which were widely accepted to be legal at the time of use. Some are expected to pay back six-figure sums.

“We never tell people how to pay their tax debt – it makes sense for all options to be considered, including taking out a commercial loan, to work out what is best for them,” a spokesman for HMRC said. “The first step in this process is to contact HMRC so we can discuss the help that we can offer.

“We are working hard to help thousands of people out of avoidance for good and as part of this we aim to offer manageable and sustainable payment plans whenever we possibly can.”

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