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The effects of BN66 on those involved

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Behind each story like this it is easy to forget the families involved. So one of the people affected decided to collect information on the hidden cost.

BN66 and the subsequent Section 58 of Finance Act 2008 is aimed at collecting tax that HMRC believe to be unpaid. However, it is easy whilst debate the rights or wrongs of this to forget the families of those involved.

So Nigel Jagger, one of those affected, decided to produce a survey to illustrate the hidden cost of section 58. This was presented to the Joint Committee on Human Rights (JCHR) and illustrated the point so well that the committee decided that the legislation infringed on the human right to peaceful enjoyment of possessions in Article 1 of Protocol No. 1 of existing Human Rights legislation.

This was the evidence put forward to the committee (all following content courtesy of Nigel Jagger):

Introduction

Section 58 imposes a retrospective tax on people who used a scheme based on the UK/Isle of Man double taxation treaty. The tax is also subject to retrospective interest. According to HMRC, around 2000 people used the scheme between 2001 and 2008.
A survey was carried out in early June 2009 to assess the impact this tax would have on
people's lives, and 100 responses were collected. All of those who took part in the survey were self-employed freelance workers eg. IT contractors, management consultants, Oil & Gas engineers.

Financial Impact

53 people provided a detailed breakdown of their liability to tax and interest, and these
averaged out at approximately:

Tax - £112,000
Interest - £27,000
Total - £139,000

Of the 100 people who responded:

  • 58 said they could not meet the tax demand, even if they sold all of their assets including
    their family home.
  • 36 could only settle by selling or, where possible, remortgaging their home
  • 6 could cover the liability from savings/investments or by delaying retirement

Many people indicated that, whilst bankruptcy might be their only option, it would prevent
them from continuing in their current line of work due to solvency requirements imposed by many organisations eg. financial institutions, government agencies.

Human Cost

The majority of those who responded have families with children. The fear of financial ruin has placed a terrible strain on many relationships, and some marriages have already broken down.

  • 47 people said they were under severe stress
  • 14 reported problems sleeping
  • 9 said they were suffering from depression

Selected Quotes

Below are a selection of quotes from the survey responses.

"For the last year, it feels as if I have been standing in the middle of a cell with no windows, doors or other exits. The walls have been gradually moving inwards towards me and eventually they will crush me."[5]

"The situation is causing great stress especially for my wife who is pregnant. The pregnancy is already complicated by a number of medical conditions and this additional stress is only making the situation worse!"[8]

"This is causing great stress on our relationship and both of us suffer from periods of stress and unhappiness as a result. Although the biggest losers in all of this are the kids due to the pressure on me an my wife we are often less than patient with them and they are not having the fun time that youngsters should be having. I am finding the prospect of all of this very difficult to handle and I am struggling to sleep at night, sometimes resorting to alcohol to both help sleep and forget, whilst it is not out of control I am aware that this is the slippery slope."[11]

"I have a stressful job and having this occur in my private life means I cannot concentrate/focus on my job, often I am stressed as a result of both my job and because of this which sometimes is really hard to deal with, to the point where the worry has pushed to the point of breakdown and I have felt I cannot take no more I just want it all to go away. The thing that makes my situation worse is that my children who are 6 and 4 do not know what is going on and sometimes when it is hard for me to deal with they don't see a happy dad and I take it out on them, my relationship with my wife has also suffered as a result of which on most occasions leads to arguments."[12]

"This has been a black cloud hanging over my wife and children for 6 years because HMRC taken this long to take action. Caused untold strain on marriage and family life."[39]

"The stress at times has been horrendous. My wife has cried herself to sleep many times. It has put a strain on our marriage, made much worse by HMRC dragging it out for so many years. If they had fought and won years ago, we would be left with something, and would have had time to plan. Now we don't."[47]

"My wife and I came close to splitting up last year when all of this blew up. We had constant rows about money, and this was not nice for our three children to listen to."[54]

"Selling the house is not an option as the wife would then want a divorce, don't even want to think about bankruptcy - what about prison?"[59]

"The stress of the situation topped by unfair and unreasonable demands from HMRC has resulted in divorce proceedings and I am having to sell my house in order to meet this obligation."[62]

"It is no exaggeration to say that I have had nightmares about the potential impact of
this on us, and I worry about this issue many times a day. My wife who is also currently
undergoing IVF treatment has point-blank refused to discuss this matter because she finds it too worrying to talk about."[65]

"Black deep depression at times. I worry for our old age; My wife worries if I will survive to
'enjoy' it."[69]

"It has affected me in that I can't sleep (DR prescribed sleeping pills but they don't really
help) which is making me feel really unwell most of the time. I also have back problems (had surgery) and the strain is really beginning to tell. My back is the worst it has been for 8 years (since the surgery). My wife handles it well on the surface but it is eating away at her. She has been ill for 8 out of the last 12 months."[81]

"In short, this government act has ruined my life since it became law."[100]

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