The UK government has committed to wiping thousands of pounds off the outstanding settlements of everyone who remains in scope of the Loan Charge, in response to the latest independent review into the controversial disguised remuneration policy.
The retroactive tax policy has left thousands of IT contractors living under the shadow of life-changing tax bills since it came into force in April 2019, who previously participated in loan-based remuneration schemes between December 2010 and April 2019.
Scheme participants are typically paid in part for the work they do in the form of non-taxable loans, allowing those involved to bolster their take-home pay. The Loan Charge policy was introduced to recoup the tax that scheme participants avoided paying. However, the policy’s critics claim it fails to take into account that, before and during the time period the Loan Charge covers, many of these schemes were mis-sold to participants as being an “HM Revenue & Customs compliant” means for contractors to boost income.
As previously reported by Computer Weekly, the government set out plans in the Autumn Budget 2024 to commission an independent review of the policy to “help bring the matter to a close for those affected, whilst ensuring fairness for all taxpayers”. This was the second independent review carried out into the policy, with former HMRC assistant director Ray McCann appointed by HM Treasury to oversee the process, starting with a call for evidence in March 2025.
On the same day as the Autumn Budget 2025 took place, the content of McCann’s review was published, where he made nine recommendations that he said would “create a means whereby everyone who wants to settle their tax position through agreement with HMRC, can settle”.
As stated in the McCann review: “Its method, as part of a structured approach to settlement, is to use a series of standard adjustments to suspend a portion of an individual’s current liability which, if the terms of the suspension and payment plan are met, would in time be written off.”
This approach is, he continued, intended to incentivise people to reach a settlement with HMRC and deter them from any further involvement in tax avoidance schemes.
“The review recommends a new approach to settlement which suspends (subject to conditions) part of the overall tax owed to make allowance for the proportion of the income taken by the [loan scheme] promoters and further suspends part of the overall liability equivalent to late payment interest and penalties,” said the McCann review.
Some of the McCann review’s recommendations include:
- Individuals work with HMRC to agree a reduced settlement amount, with the difference to their current Loan Charge liability suspended and eventually written off provided the terms of the suspension are met.
- Late payment interest on outstanding Loan Charge settlements should be suspended, and so should up to 10% of the gross scheme income per tax year to account for fees paid.
- Payment plans of up to five years should be offered by HMRC by default, but HMRC also has the option to approve repayment plans of 10 years.
In its response to McCann’s review, the government said it “accepts all but one” of McCann’s recommendations, and “in several cases, will go further” by offering to write off the first £5,000 of each individual’s outstanding Loan Charge liabilities.
The one recommendation in McCann’s report that the government said it would not carry forward says the time to repay Loan Charge settlements can be extended by up to 10 years, with HMRC’s approval. This recommendation further states that if the person is unable to settle their liabilities within this timeframe “as a backstop – the remainder could be suspended”.
In response, the government said it would be willing to give those in scope of the policy longer than 10 years to settle their liabilities, but does not accept the recommendation that the remaining liabilities should be suspended if people cannot pay within 10 years.
“The government believes that this recommendation would lead to unnecessary, potentially protracted, engagement between HMRC and taxpayers over payment plans and would not support the objective to draw a line under the issue,” said the government response. “However, the government commits to ensuring the existing process for taxpayers who cannot afford to pay is made clearer.”
Overall, the settlement recommendations put forward by McCann would “substantially reduce the outstanding liabilities of those yet to settle with HMRC”, said the government, in its response, adding: “Most individuals could see reductions of at least 50% in their outstanding loan charge liabilities, and an estimated 30% of individuals could have these liabilities written off entirely.”
It also stated that it would push through legislation in the forthcoming Finance Bill to allow McCann’s recommendations to be put in force.
However, despite the positive impact the government said the settlement reforms will have on those in scope of the Loan Charge, a group of cross-party MPs – operating as the Loan Charge and Taxpayer Fairness All-Party Parliamentary Group (APPG) – have hit out at the contents of McCann’s review, describing its recommendations as “discriminatory and unfair”.
Greg Smith, co-chair of the Loan Charge and Taxpayer Fairness APPG, said the review also fails to “adequately recognise the industrial mis-selling” that contributed to so many people falling foul of the policy in the first place.
“The chancellor [Rachel Reeves] herself acknowledged last year that instead of pursuing victims of mis-selling, HMRC should go after the perpetrators. Yet instead, the government then commissioned a highly restricted review that didn’t even consider this,” said Smith.
“While concessions are a step forward and will help some of those involved, it will not end the nightmare for others and it fails to hold HMRC to account for its clear failures and its decision to discriminate so ruthlessly against people shown to be victims of mis-selling, which has led to 10, possibly now 11 suicides.”
Smith added: “There still needs to be a proper independent inquiry, which unlike the McCann Review, must actually be independent of HMRC and not led by someone who used to work there”.
Meanwhile, campaigners from the Loan Charge Action Group (LCAG) also outlined their disappointment at the contents of the review, which they described as being too narrow in scope and “clearly not independent” due to McCann’s former role working for HMRC.
LCAG spokesperson Steve Packham said the recommendations will help to reduce the size of the liabilities people are facing, but will not resolve the “thousands of cases” that remain open for a long time to come.
“There are many people [in scope of the Loan Charge] who now have lost income due to Covid, IR35 changes and the mental distress caused by the Loan Charge. There are many people who will still face unaffordable bills, which is likely to mean further bankruptcies and more distress,” he said.
“Despite the fact ministers have acknowledged that those affected are victims of mis-selling, the report does nothing to pursue the perpetrators of the industrial mis-selling – including chartered accountants, recruitment agencies and scheme promoters. This is despite Rachel Reeves herself calling for HMRC to pursue the perpetrators, not the victims, just last year.
“The review also excludes those who were pushed to settle under duress from HMRC, which means they will have ended up paying more than those who didn’t, which is grossly unfair when HMRC told them to settle and threatened them with far greater demands if they did not. There still needs to be a proper and genuinely independent inquiry into the whole thing. Only that can resolve the Loan Charge scandal and expose the truth about this whole fiasco.”
