Pressure mounts on HMRC over loan charge ‘mess’

Labour leader says HMRC has ‘urgent questions’ to answer over handling of the loan charge

Sir Keir Starmer has raised concerns about the impact the loan charge has had on people’s livelihoods, in a letter – seen by The Yorkshire Post – to the tax barrister, Keith Gordon.

The Labour leader said: “Many people face substantial payments for schemes they were often inadvertently forced into by employers or poorly advised by accountants. 

“The impact in far too many cases has been extremely serious, in some cases leading to distressing financial and personal harm.

“We believe HMRC has urgent questions to answer about the handling of this issue and to ensure enforcement is fair and proportionate.”

Loan charge review was ‘shamefully’ voted down

The loan charge was introduced to tackle loan schemes, which were considered non-compliant disguised remuneration arrangements. It is essentially a tax charge on these loans taken out on or after 9 December 2010 and outstanding on 5 April 2019.

Starmer added that the way in which HMRC enforced the loan charge is “why we supported an amendment to last year’s Finance Bill”, as it would have forced a review of the impact by an independent panel within six months.

However, this was “shamefully” voted down by the Conservatives who are “still looking to avoid scrutiny of their handling of the issue.”

Therefore, he said: “I’ve instructed my Shadow Treasury Ministers to scrutinise this legislation closely and improve it, with the help of loan charge campaigners, to prevent anything like this happening again.”

Campaign group welcomes offer to work with Shadow Ministers

Following the publication of Starmer’s letter, the Loan Charge Action Group (LCAG) has written to the leader of the opposition party to take up his offer to work with campaigners.

In its letter, seen by Contractor Weekly, LCAG said: “Without changes to the loan charge, there will be many further bankruptcies in addition to the serious risk of further suicides.

“To date, there have been seven suicides confirmed as being related to the loan charge, an issue that has been raised in parliament but disregarded by ministers and HMRC who have shown a callous lack of regard for people’s lives.”

The group added that there seems to be “considerable opposition” to the charge despite 115 parliamentarians signing an open letter to the Prime Minister and Chancellor calling for an independent review and suspension of it.

Government failed to target the ‘true villains’ of the schemes

In response, Keith Gordon said: “I have long been prepared to work with any MP of any political affiliation in order to resolve this issue. 

“I am glad that the Labour front bench now seems prepared to address the unfairness caused by the loan charge and wider problems within the tax system that the loan charge has highlighted. I look forward to working with them in order to reinstate fairness within the system.”

Andy Chamberlain, Director of Policy at self-employment trade body, IPSE, said: “It is good news that the Labour Party is piling pressure on this government and ensuring the loan charge scandal does not pass out of political memory.

“As we have highlighted in the past, HMRC’s approach has caused enormous distress to thousands of contractors across the UK and also failed to target the true villains of the piece, the people who actually promoted disguised remuneration schemes.

“It is right for Labour to push government on this to ensure both that policies are enforced fairly and proportionately, and also that there is never a repeat of this disastrous mess.”


  • Johnny says:

    Same MO as IR35 and Brexit. A subject made so complicated it’s easy to hide the big lie in the spin.
    Can anyone justify the Loan charge or is it just another HMRC shakedown of the powerless?

  • Gary Andrews says:

    A (borrowed) summary of Loan Charge issues:

    1. Some umbrellas partially used loans and trusts in underlying schemes to remunerate workers.

    2. There is a whole tax code that deals with the taxation of employer loans – they are taxed very cheaply on an annual basis until such time as the loan is written off or repaid.

    3. HMRC had repeatedly tried to argue that the loans were taxable as earnings.

    4. The Courts and Tribunals repeatedly told HMRC that their argument did not work – the special rules for loans had to be abided by.

    5. Eventually in Rangers, HMRC changed their argument. They argued (at the 3rd hearing) that the funds were taxable (from the employer) as earnings long before some of them were paid as loans to the workers.

    6. However, the Rangers result was a double-edged sword for HMRC. It vindicated their opposition to these schemes but meant they had failed to get their employee targets. The verdict found the employer liable.

    7. So the loan charge (a new 20 year retrospective tax on the workers) was introduced to get HMRC out of that particular hole.

    8. Now any unpaid loans would be seen as outstanding PAYE income all due in one year at the top rates.

    9. Deductions spiralled with unexplained employers NI, inheritance tax all calculated from exaggerated gross agency fees.

    10. HMRC Behavioural Insights team used propaganda to paint their victims as tax evaders although they legally owed nothing.

    11. Access to judicial review and appeal cases became irrelevant due to loan charge timescales and diminishing access to the European Court of Human Rights.

    12. Parliamentary scrutiny was blocked by assigning loan charge architect, Mel Stride, to the chair of the Treasury Select Committee.

  • Michael Lawrence says:

    On the other hand… If someone offers you a scheme where they tell you that they are going to pay you using ‘loans’, from an offshore company, that you are never going to have to pay back. Wouldn’t you question the legality let alone the morality of this? I was offered these many times and the topic was often discussed with other contractors. The conclusion was ‘if it looks too good to be true – it probably is’. As contractors we are supposed to be sophisticated business entities involved in B2B arangements. You want protection against being stupid? Become a permie!

    • Martin B says:

      Ah the tax code based on morality. I assume with your use of ‘permie’ and ‘B2B’ you’re familiar with IR35. How does your morality tell you do to traverse that?
      It’s the reason contractors ditched limited companies to go be a permie at such umbrellas in the first place.

  • Paul says:

    Are you repeating HMRC spin Mr Harra? Offshore?
    The fact is these loans where taxable at a given rate wherever they came from. Changing the rate and backdating twenty years was the unlawful part.

    • Michael Lawrence says:

      All the schemes I saw were based on an offshore element (even if that was Isle of Man). I am not defending tax law – they way it is cast at the moment is undefensible. But just because something illegal in the UK is legal elsewhere doesn’t make it right. That was Gary Glitter’s argument – that he wasn’t a paedophile because he only had sex with 13 year old girls in countries where that was legal. Tax evasion using overseas elements just follows the same logic

      • Paul says:

        You’re confusing tax evasion with avoidance (and paedophilia). The offshore part is irrelevant but makes good propaganda for a press release.
        Respectfully, you don’t seem to understand the issues properly enough to comment.

        • Michael Lawrence says:

          Evasion/Avoidance .. Even HMG get confused in the naming of this. ‘ “Extreme” Tax Avoidance’ was the buzz for a while. Suggest we all stick to logical argument here folks… Not attacking each other.

  • Tax isfor mugs says:

    20 years of tax and ni free pay…yes please

  • Jim Harra says:

    “In recent months I have repeatedly tried to obtain legal analysis to understand the strength of our claim with very little success.

    For yesterday’s hearing we were initially given a summary of [tax] avoidance wins, some of which seemed to have nothing to do with DR”. – HMRC CEO Jim Harra in FOI disclosure

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