"I spent 20 years in banking. A £500k tax bill destroyed my life"
Young people in financial services jobs are complaining about high taxes in London. I absolutely sympathise, but I also caution anyone who thinks taxes can be avoided - even legally. I am part of a generation of London bankers who were wronged by HMRC, and it has financially destroyed me.
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I spent 20 years working in the markets in London. I was successful and worth millions. I had a wife, four children, a house in Essex with a pool and a tennis court.
Around 2008, the bank I worked for suggested a legal tax avoidance scheme involving an employee benefit trust. These kinds of schemes were common at the top - 2,000 London bankers at JPMorgan were using them. They enabled individuals to avoid paying tax on bonuses by handing bonus money to an offshore trust, which then returned the money in the form of a loan.
I was suspicious, but everyone was doing it and when I asked my personal financial advisor he assured me that it was legitimate. At the time, the schemes were widely used and broadly understood to be acceptable.
Then, in 2013, the British government passed something called the General Anti-Abuse Rule as part of the 2013 Finance Act. Coupled with previous rulings from 2004 and the disguised remuneration rules of 2011, this enabled the government to declare tax avoidance schemes retrospectively impermissible and to demand payment of tax that it considered due.
It came at a difficult time of my life. My wife left me and I had gone through a difficult divorce, but I still had money in the bank. And then - overnight - I received a retrospective tax demand for hundreds of thousands of pounds.
I was financially wiped out. For a while, it felt like my whole life had been destroyed. I wasn't alone in using these schemes, which were also popular with lower earners like nurses and contractors. There have been multiple suicides as a result.
Everyone in the UK is now familiar with the Post Office scandal, but this is a scandal that no one discusses. The presumption is that we did something wrong, but we didn't. The government changed the rules overnight; you can't go up against HMRC.
After my divorce, I was unable to pay the bill. HMRC started sending me aggressive letters demanding that I pay and began imposing punitive fines. It nearly killed me; I could easily have taken my own life, too. In 2015, though, I came to a repayment agreement with them. I've paid back £500k already and when I factor in fines and legal fees, the taxation on my earnings from the period covered by the trust has reached 80%.
I am now in my 60s, and I am still paying the bill off.
This is what tax injustice really looks like.
Tony Patrick is a pseudonym
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