Thursday, April 3, 2025

MPs Condemn Latest Independent Inquiry into Loan Charge as ‘a Farce’

A group of cross-party MPs is calling the government’s newly announced independent review of the controversial Loan Charge policy a “farce.” This follows the government’s pledge in the Autumn Budget of 2024 to investigate the policy, which has burdened countless IT contractors with severe tax bills.

When the review was announced, campaigners who’d been advocating for a fresh inquiry welcomed the news. On January 23, 2025, the government confirmed the review is underway. Treasury Secretary James Murray announced that Ray McCann, a former HM Revenue & Customs (HMRC) assistant director, will lead the review. Murray explained that the focus would be on understanding the hurdles individuals face in resolving their Loan Charge cases with HMRC and ways to overcome these challenges.

The review aims to help those affected and ensure fairness for all taxpayers. McCann will consider the settlement options for those who haven’t fully paid their tax obligations and evaluate whether HMRC’s processes adequately consider individuals’ ability to pay. The inquiry will also explore how to encourage these individuals to reach resolutions with HMRC without adding undue penalties or administrative burdens.

However, now that the goals are clearer, MPs from the Loan Charge and Taxpayer Fairness All Party Parliamentary Group (APPG) are vocally criticizing it. They are particularly frustrated that the review won’t examine the underlying legislation and question how objective it will be, given that it’s led by a former HMRC official. This person will submit findings to HMRC and HM Treasury before they’re made public.

The government has indicated it will support McCann’s review team, providing information as requested unless legally bound not to. Before the final report sees the light of day, HM Treasury and HMRC will have a chance to review it and comment. Details of their inputs will also be disclosed post-evaluation.

Greg Smith MP, co-chair of the APPG, called the review a farce, stating it does not genuinely address the Loan Charge. He expressed concern that the review merely defends the policy, without considering its fairness or the legislation behind it. In December 2024, the APPG sent a letter to the chancellor outlining specific areas they believe should be reviewed, including why so many contractors initially used these loan-based schemes.

The APPG insists on a truly independent review with no influence from HMRC, Treasury, or any government bodies. This stems from earlier complaints about government interference in previous inquiries. Smith noted that appointing someone with ties to HMRC undermines the integrity of the review process.

Campaigners from the Loan Charge Action Group (LCAG) share similar sentiments, criticizing the government’s handling of the review. LCAG spokesperson Steve Packham labeled the announcement as a “complete betrayal,” raising concerns about its potential impact on the mental health of those caught in the Loan Charge crossfire. The policy has been linked to multiple tragedies, including at least ten suicides. Packham voiced fears that the perception of a “sham non-review” could exacerbate the distress many have endured while facing substantial tax demands they cannot pay.

Around 40,000 people are still in limbo regarding their Loan Charge cases with HMRC.

The reasons many individuals turned to loan-based remuneration schemes are complex. They partly connect to the implementation of IR35 tax avoidance rules in the early 2000s, which pushed contractors towards these schemes as a way to bypass potential tax increases. Some were reportedly advised to join the schemes by tax professionals, believing them to be safe. Many now feel misled, alleging they trusted respected sources who assured them the arrangements were compliant.

The exclusion of scheme promoters from the review adds to the frustration expressed by advocates for fair treatment. Packham emphasized that targeting those who exploited the system, rather than the victims, is crucial. He pointed out that the review fails to hold accountable the institutions and individuals who profited from these schemes while those now facing HMRC’s scrutiny are left vulnerable.

Crawford Temple, CEO of Professional Passport, echoed this disappointment, stressing that the review should investigate why these schemes came to exist rather than only focus on extracting payments from affected contractors. He criticized the government for not pursuing scheme promoters and for allowing them to continue their operations unchecked.

In Murray’s statement to Parliament, he maintained that those who owe taxes must face their obligations, aiming to reinforce the principle of fairness for all taxpayers. However, concerns linger about whether this review can address the deep-seated issues surrounding the Loan Charge. The second independent review is expected to wrap up in the summer of 2025, with the government’s response anticipated in the following Autumn Budget.

The APPG has already begun pushing for a further examination of the policy, with contracting authority CEO Dave Chaplin drawing parallels between this situation and the Post Office scandal. He expressed skepticism that the current approach aligns with a genuine inquiry, calling it more of a “whitewash.”