Loan charge review dismissed as ‘sham’

A newly announced review into the loan charge has been dismissed as a “sham” by campaigners.

This week, the government announced a long-awaited independent review into the controversial policy, which was designed to recover backdated taxes.

However, it has left many people facing hefty bills and been linked with 10 suicides.

What is the loan charge?

The loan charge was introduced in 2019 to tackle tax avoidance schemes where freelancers were paid through loans instead of salaries.

This arrangement allowed them to legally avoid income tax and national insurance, and the loans were often never meant to be repaid.

Initially applying to loans dating back to 1999, later changes limited the scope of the loan charge to those taken after December 2010. 

Critics have argued it unfairly targets people who didn’t fully understand the schemes and that it’s caused financial and mental health issues. 

What is the review for?

The government review will look at what’s preventing those who owe money from resolving the situation with HMRC and recommend ways “in which they can be encouraged to do so”.

Treasury minister James Murray acknowledged there are concerns about “the size of liabilities owed by some of those affected and their ability to pay the tax that they owe in a reasonable timeframe”.

However, he said it is “right that those who did not pay the right amount of income tax and national insurance are required to resolve their affairs with HMRC”. 

“Accepting otherwise would be contrary to the decisions of the courts and would be unfair to the vast majority of taxpayers who have never used these schemes,” he commented.

Review ‘a complete betrayal’

The Loan Charge Action Group has reacted angrily to the government’s stance, calling it a “sham” and a “complete betrayal” of those affected.

Speaking to BBC News, founder Steve Packham said: “What the government has announced is not a review at all, as it astonishingly excludes reviewing the loan charge.”

Greg Smith, Conservative MP and co-chair of the Loan Charge All Party Parliamentary Group (APPG), was equally scathing, describing the announcement as “a farce”.

"This is not the review that was promised nor the review that is so desperately needed,” he commented.

Mr Smith added that the APPG will continue pushing for “a genuine inquiry into this scandal”.

The review, led by former president of the Chartered Institute of Taxation Ray McCann, will present its final report in summer.

Seek help if you’re struggling 

If you’re struggling financially as a result of paying the loan charge, then it could well be worth getting advice.

We offer free and impartial money advice on everything from setting a budget to finding the right debt solutions.