HMRC puts Loan Charge settlements ‘on pause by request’ until independent review concludes

Financial burden

The letter shines a light on the level of financial burden the loan charge is placing on people, with one individual caught in-scope of the legislation quoted as being told by HMRC in 2017 that they owed £60,000 in unpaid tax – but that sum has now risen to £500,000.

The letter also flags the cases of some other individuals, who participated in the meeting with Murray in August 2024, who HMRC has calculated owe between £200,000 and £300,000 in Loan Charge liabilities. Previously, HMRC has claimed a typical Loan Charge settlement is in the region of £13,000.

“In all eight cases [presented to Murray], the individuals cannot possibly pay the sums being demanded,” the APPG letter stated. “They simply do not have the money HMRC is demanding of them. This, of course, means that the HMRC figures of how much they will collect from the Loan Charge and associated activity is completely spurious, as it is impossible for them to collect anything like this amount, when people simply cannot pay.”

The amounts of money HMRC claims from people affected by the Loan Charge is one of several reasons why the policy has proven so controversial.

The policy’s retroactive nature is another, as many of the individuals who are now being pursued under the terms of the Loan Charge claim the schemes they participated in were recommended to them by trusted tax advisors and chartered accountants.

“Four of the witnesses [participating in the meeting with Murray] were placed into umbrella companies through their agencies and the umbrella companies recommended that they use the arrangements now subject to the Loan Charge,” the APPG letter continued.

“[Another] four witnesses had chosen to work through umbrella schemes because of concerns about the IR35 legislation … As with the vast majority of those affected by the Loan Charge, these are not people who set out to avoid tax … they all used the schemes because they wanted to be compliant with the law. All of these people had taken and then followed professional advice, from either their work agencies or trusted advisers – which included chartered accountants, as well as accredited advisers.”

Independent review

At the end of October 2024, several weeks after the APPG wrote to Murray, the UK government confirmed during the Autumn Budget an independent review of the policy, with the intention of bringing the fallout from the policy to a close, would take place.

This will be the second time an independent review into the policy has been undertaken by the government, with the first being published in December 2019.

At the time of writing, HM Treasury – the government department tasked with overseeing the review – has yet to confirm details of when the second review will start, how broad its terms of reference will be, and who in government will be responsible for leading it.

Computer Weekly understands, though, that HMRC has already started offering contractors caught in the Loan Charge’s scope the opportunity to request a pause in their settlement payments until the review’s outcome is known.

However, this stance has only been communicated to contractors who have contacted HMRC directly, prompting calls for the agency to make it more widely known to the thousands of people affected by the Loan Charge that this option is available.

An IT contractor, who spoke to Computer Weekly on condition of anonymity, said: “They should be letting all those victims affected by the Loan Charge know what their options are.”

An HMRC email, seen by Computer Weekly, states the government agency has “not yet been instructed to” pause settlements for those affected by the policy, but has “been asked to accept customer requests to pause current settlement activity” pending the outcome of the review.

The email also advises those considering requesting a settlement pause to “consider making a payment on account” to HMRC to “reduce or stop further late payment interest being charged”.

The email added: “Any payments made will be refunded with repayment interest, if the review later [concludes] the tax owed does not need to be paid.”

Computer Weekly contacted HMRC for clarification on its decision not to make it widely known that it is offering contractors the opportunity to pause their settlements, but was told all press queries relating to the Loan Charge should be directed to the Treasury.

In response, a spokesperson for the Treasury provided the following statement: “We recognise that concerns continue to be raised about the Loan Charge. The government will honour its commitment to hold an independent review of the Loan Charge to help bring the matter to a close for those affected whilst ensuring fairness for all taxpayers.”

Public appeal

In the wake of the Autumn Budget 2024, campaigners from the Loan Charge Action Group (LCAG) publicly appealed to HMRC to pause its enforcement of the policy until the government concluded its latest review of the policy.

LCAG spokesperson Steve Packham said, given the personal toll the policy is taking on those in its scope, it is “unfair for some people’s cases to be put on hold and not others”.

Speaking to Computer Weekly, he said: “Now that the government has announced they will commission a fresh review of the Loan Charge, it is vital that Treasury ministers announce that all related taxpayer cases and associated HMRC action will be put on hold until the review has concluded and reported.

“The fact that the government has commissioned this review reflects the serious concerns about the controversial Loan Charge and HMRC’s approach, that has led to ten suicides,” said Packham. “It is unthinkable for this same approach to be allowed to continue whilst an independent review is taking place.”