Independent review into Loan Charge launches

A review into the Loan Charge has been launched, following concerns over the size of liabilities owed by some people affected and their ability to pay tax owed in a reasonable time frame.

First announced in 2016, the Loan Charge was designed to tackle historical use of contrived tax avoidance schemes.

Such schemes sought to avoid charges of income tax and national insurance (NI) by disguising remuneration as a form of non-taxable payment, typically a loan.

The schemes have existed since at least the mid-1990s and have been considered by the courts.

In 2017, the Supreme Court agreed with HM Revenue and Customs (HMRC) that schemes that redirect earnings and ultimately pay them in the form of loans do not succeed in avoiding tax.

The Government said it recognises court decisions and believes it is right that those who did not pay the right amount of income tax and NI are required to resolve their affairs with HMRC.

But it said ongoing concerns remain about the Loan Charge and the new independent review aims to bring the matter to a close.

Exchequer Secretary to the Treasury James Murray said: “Today, we honour our commitment to launch an independent review of the Loan Charge, bringing the matter to a close for those affected while maintaining fairness for all taxpayers.”

Ray McCann, former president of the Chartered Institute of Taxation, who has been commissioned by Mr Murray to lead the review, said: “I was pleased to be asked to help find ways whereby those involved can reach an agreement with HMRC that balances their right to be treated fairly with the expectation of the vast majority of taxpayers who have paid all of the tax and NIC (national insurance contributions) due on their earnings.

“My review will be entirely directed to that end.”

The review was first announced at the autumn Budget 2024 and the Government said the final report will be presented to the Exchequer Secretary to the Treasury by summer 2025.

Conservative MP Greg Smith, who co-chairs the Loan Charge and Taxpayer Fairness all-party parliamentary group (APPG), said: “What has been announced today 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 also 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 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.

“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.”