A cross-party group of MPs has branded the government’s newly announced independent review of HM Treasury’s controversial Loan Charge policy a “farce”, now details of the inquiry’s scope are known.
The government pledged to conduct an independent review into the policy, which has saddled thousands of IT contractors with life-changing tax bills, in the Autumn Budget at the end of October 2024.
Computer Weekly reported at the time that news of the proposed review had been warmly welcomed by campaigners, who have been calling for a fresh inquiry into the Loan Charge for several years.
On Thursday 23 January 2025, the government confirmed the review has been commissioned, with Treasury secretary James Murray, also publishing a statement in Parliament that Ray McCann, a former HM Revenue & Customs (HMRC) assistant director (who also previously served as president Chartered Institute of Taxation), has been tasked with overseeing it.
Murray also confirmed the focus of the inquiry will be on investigating the barriers preventing individuals in-scope of the Loan Charge from resolving their cases with HMRC, and finding ways to help them do so.
The review’s aim is to bring the matter to a close for those affected, said a government statement on the matter, while also “ensuring fairness for all taxpayers”.
“The reviewer [McCann] is being asked to draw on the available evidence and expertise, engaging with stakeholders as appropriate, to consider in detail the settlement terms available [to those] who have not yet settled and paid their tax liabilities in full to HMRC, and whether HMRC’s settlement and debt management processes sufficiently take into account their ability to pay and behaviours,” said the government statement.
“[It will also look into] how that population could now be encouraged to reach a resolution with HMRC; and what decisions would be required to ensure that, as far as possible, any new settlement proposals were properly targeted whilst not imposing significant additional administrative burdens upon HMRC.”
MPs slam government approach to review
Now the details of the review are known, HM Treasury and the chancellor Rachel Reeves are facing a wave of criticism, led by a group of cross-party MPs who make up the Loan Charge and Taxpayer Fairness All Party Parliamentary Group (APPG).
A major point of consternation for the group is that the inquiry will not place the legislation underpinning the policy under investigation, and it has raised concerns about how independent the review will truly be.
This is on the basis that it is being overseen by a former senior figure from HMRC, who will – as confirmed by the government – pass on his findings to HMRC and HM Treasury for review before its contents is released publicly.
“HM Treasury and HMRC must make all possible efforts to support the review team’s work by providing them with any information that they request in a timely fashion unless there is a legal reason not to,” said the government.
“The final report will be shared with HM Treasury and HMRC before publication, who may be asked to provide factual comments on it. This will include reviewing the use of any statistics provided by the departments.”
The statement added: “Information provided by HM Treasury and HMRC to the review team and factual comments provided on draft reports will be published after the review has concluded.”
In a statement to Computer Weekly, Greg Smith MP, co-chair of the Loan Charge and Taxpayer Fairness APPG, said: “What has been announced is not only a farce, but it is not actually a review of the Loan Charge, which is what the chancellor promised.
“The supposed review starts by justifying the Loan Charge and it makes clear that it will not change the position people are in, nor review the legislation and whether it was fair and justified.”
The APPG and its members wrote a letter to the chancellor in December 2024, sharing their take on what areas the proposed review should cover, including a detailed look into the circumstances that led to so many contractors enrolling in loan-based remuneration schemes in the first place.
The letter calls on the government to make sure the review is “genuinely independent”, with no involvement “at any stage” from HMRC, HM Treasury or “government as a whole” once it is established.
This demand is on the back of concerns raised by a previous iteration of the APPG back in June 2020, following the publication of the last independent review commissioned by the government into the policy, about its findings being shaped by “direct interference” from HMRC and HM Treasury.
“The APPG made clear that the review must be led by someone independent and not staffed by HMRC and Treasury officials. Instead, the government has appointed a former senior HMRC official to lead it and staffing it from the two government bodies responsible for the whole Loan Charge fiasco,” added Smith.
“This is not the review that was promised nor the review that is so desperately needed, and the APPG will continue to push for a genuine inquiry into this scandal.”
The APPG is far from alone in taking issue with the review’s narrow scope, with campaigners from the Loan Charge Action Group (LCAG) also similarly dismayed at HMRC’s involvement in its creation.
LCAG spokesperson Steve Packham described the review as a “complete betrayal” that stands to add to the mental anguish of those who have spent years in HMRC’s crosshairs, being pursued for six-figure tax payments that they have no means of paying back.
As previously reported by Computer Weekly, the policy has been linked to at least 10 suicides so far.
“We are deeply worried about the impact on mental health that the announcement of this sham non-review will have, with 10 suicides already,” said Packham. “It is clear that the HMRC and the Treasury will do all they can to avoid the truth coming out and having a genuine review, but the Loan Charge Action Group will continue to expose the reality of the Loan Charge scandal.”
According to figures previously disclosed by the APPG, it is thought that there are around 40,000 people that are still to resolve their Loan Charge cases with HMRC.
Investigating the origins of the Loan Charge
The circumstances and reasons that led to so many people participating in loan-based remuneration schemes are complex, and can – in part – be linked back to the roll-out of the IR35 tax avoidance rules at the turn of the century.
It is known that loan-based remuneration schemes were positioned and promoted as an “HMRC complaint” way for contractors to side-step the IR35 rules that risked increasing their tax liabilities. It is also anecdotally claimed that individuals were advised to join these schemes, often by seeking employment through umbrella companies, by respected tax barristers.
It’s further claimed some contractors were reportedly told they would be unable to work for certain end-hirers unless they agreed to be paid in loans.
For all these reasons, the contractors now being pursued by HMRC for backdated income tax payments claim they are victims of mis-selling and are facing financial ruin for agreeing to be part of an arrangement that trusted sources assured them was safe and compliant to participate in.
The fact the people who marketed these schemes are being excluded from the review is also another pain point for LCAG, said Packham.
“The review fails to include looking at HMRC, who conceived the Loan Charge to give themselves carte blanche to pursue victims of mis-selling [and] it deliberately avoids looking at the role of scheme promoters who made millions from mis-selling these arrangements,” said Packham. “Instead, the government has chosen to let these people off scot-free.”
Crawford Temple, CEO of independent umbrella company assessment organisation Professional Passport, also expressed his disappointment at the government’s decision to focus the review on making those caught in scope of the Loan Charge policy pay-up, rather than dig into the reasons why these schemes were allowed to proliferate and ensnare so many people at the time.
“I am incredulous that the Treasury and government are ducking their responsibility to solve the glaring problem which is to pursue the promoters of the schemes,” he said.
Particularly as loan-based remuneration schemes remain a fixture of the contracting market to this day, despite HMRC allegedly having all the data they need to stamp them out, he added.
“HMRC’s inaction is fuelling non-compliance and this review is one-sided, seeking to recover money from the Loan Charge victims when it should be focusing on the architects of the schemes,” said Temple.
“The government is avoiding chasing down the promoters of these corrupt schemes and appears to be building arguments to persist with, in my opinion, the flawed strategy of seeking recovery from the workers. The criminals will escape punishment and be allowed to thrive and continue to run their illegal practices, duping unwitting contractors into signing up for their illegal schemes.
“This was a good opportunity to conduct a proper review into the scandal and it falls way short. The brief to Ray McCann is skewed.”
Computer Weekly contacted HM Treasury for a response to the points raised in this story, but no response was forthcoming by the time of publication.
However, Treasury secretary Murray – in his statement to Parliament announcing the review – said it is the government’s view that “it is right that those who did not pay the right amount of income tax and National Insurance are required to resolve their affairs with HMRC” and that “accepting otherwise would be contrary to the decisions of the courts and would be unfair to the vast majority of taxpayers who have never used these schemes”.
He added that the government does “recognise that concerns continue to be raised about the Loan Charge”, particularly where the “size of liabilities owed by some of those affected and their ability to pay the tax they owe in a reasonable timeframe” is concerned.
This is the second independent review commissioned into the Loan Charge, with the first concluding more than five years ago. It was overseen by ex-National Audit Office (NAO) chief Amyas Morse, and focused on ascertaining if the policy was the most appropriate way to tackle disguised remuneration.
In the immediate aftermath of its publication in December 2019, the government announced a couple of amendments to the Loan Charge policy, including one that pledged to write off the tax bills of 11,000 people previously caught in its scope.
It achieved this by cutting 11 years off the original 20-year period the policy covered and by cancelling the Loan Charge for any individuals who previously disclosed to HMRC that they participated in a scheme on their tax returns if the agency failed to act on this information.
The review also prompted the government to revise the policy’s repayment terms by making it possible for those in-scope to pay back what they owe over several tax years instead of one.
While these amendments were initially welcomed, misgivings about its contents began to surface months later, with tax advisers and contractors claiming the proposed changes did not go far enough.
And, this time around, it seems the new government could find the outcome of its review similarly reviled at the time of its conclusion. Presently, this second inquiry is expected to conclude in the summer of 2025, with the government expected to publish a response to it by the time of the 2025 Autumn Budget.
As stated, the APPG have already begun calls for another inquiry into the policy, with Dave Chaplin, CEO of contracting authority ContractorCalculator, echoing the sentiments of the APPG that the government’s approach to investigating the Loan Charge is similar to its handling of the Post Office scandal.
“Whilst I initially welcomed the launch of the government-titled Independent Loan Charge review, it turns out when you look at the terms of reference, you discover that it bears no resemblance to the title. It should be renamed the Whitewash review,” he said.
“The government are engaging in misinformation and cover-up, a clear abuse of power, firmly in the same sort of Post Office scandal territory.”
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