The Loan Charge - An Uniquely British Scandal?


With calls to overhaul the Government’s controversial Loan Charge growing amid disappointment at the lack of debate on the new Finance Bill in Parliament recently, the Renew Party’s Business spokesperson, Gary Burke, calls for an urgent end to this unjust and unfair attack on ordinary working people.


“The size of the UK’s tax code has more than trebled since 1997 and runs to more than 17,000 pages” said Gary. “Tax law has been created, often in haste and with little scrutiny, and without understanding the impact of changes. The Loan Charge is one such piece of legislation.  It is widely regarded as one of the biggest injustices of recent times, with the government and HMRC pressurising MPs to drive it through parliament.


“The origins go back to 2000 when the then Labour government introduced IR35; legislation intended to stop individuals who would otherwise be regarded as employees from operating through a limited company to gain a more tax-efficient way of being paid. IR35 was another hastily introduced piece of legislation and was heavily criticised at the time, as its impact was wider than anticipated. As a consequence, a number of tax advisors and umbrella companies started offering alternative payment schemes enabling freelancers and contractors to avoid being incorrectly caught by IR35. 


“By the mid-noughties the use of schemes within the freelance and contractor community was widespread. They were legally advertised and promoted, within the law and often QC and tax specialist validated. They were also often branded as being HMRC compliant or HMRC approved. HMRC were fully aware of the existence of these schemes and scheme users fully complied with disclosure rules when submitting their annual tax returns.


“Normally, after a tax return is filed, HMRC has 12 months to open an inquiry into your tax affairs. It can then go back up to four years if it finds anything unusual. In cases of tax evasion or fraud, they can investigate up to 20 years after a filed return. Yet, tax avoidance is not the same thing as tax evasion. Avoidance is legal (although considered not within the spirit of the law) whereas tax evasion is illegal.


“However, the Loan Charge legislation effectively removes the time protections taxpayers would normally be entitled to and rides roughshod over one of the fundamental principles of a good tax system, ‘certainty’. 


“The number of scheme providers and their use continued to proliferate, being increasingly used by teachers, nurses and government workers, as well as contractors. Although HMRC took some cases to court they consistently lost.  However, they made no attempt to change the law or outlaw schemes from being promoted.


“Could this be explained by the fact that wealthy Conservative Party donors such as Doug Barrowman of AML are promoters of such schemes?


“A financial bombshell was dropped in the 2016 Budget when George Osborne promised to ‘shut down disguised remuneration schemes’. The Loan Charge legislation was introduced with no scrutiny (it bypassed normal parliamentary process, so MPs did not get the chance to debate it and understand its full implications). Crucially, this piece of legislation allows HMRC to ignore the normal judicial process of chasing individual taxpayers for disputed tax.  It also includes years when HMRC did not even open an inquiry.


“After almost two decades of inaction, HMRC have effectively said that, although these schemes are legal, they shouldn’t have been. They are now aggressively pursuing individuals for what the HMRC claims to be unpaid tax, and there is no right of appeal.


“To make matters worse, schemes are still being promoted, because it is legal to do so. Thousands have signed up in 2020, including people returning to the NHS to help with the Covid-19 crisis. Without urgent changes to the legislation these people could be future victims of an unfair and unjust law. 


“An APPG (All Party Parliamentary Group) was formed to try to get the legislation amended to remove the retrospective aspect. This APPG gained support from an almost unprecedented 235 MPs from all parties, including established MPs such as David Davis and Iain Duncan Smith.


“After much pressure from the APPG, and other bodies, an independent review was granted, conducted by Sir Amyas Morse, which reported in December 2019. Many now believe that the review was anything but independent with HM Treasury and HMRC thought to have sought to influence its conclusions.


“A last-ditch attempt was made on July 1, 2020, to introduce an amendment to the Finance Bill (New Clause 31) that would remove HMRC’s draconian powers and restore the right of an individual to challenge any tax demand from HMRC. However, the Tory whips were out in force and the Treasury issued a misleading briefing note. This, along with pressure from the government meant the amendment was never actually voted on, with the Labour front bench failing to push for the amendment to be debated.


“As I write, thousands of hard-working people claim they are suffering from serious mental health issues caused by the Loan Charge and are about to face financial ruin.  Tragically, seven people are believed to have committed suicide because of the Loan Charge, and it is entirely possible that further lives will be lost.


“The Renew Party agrees that everyone should pay their fair share of tax.  However, the way the Loan Charge is being implemented is wholly unjust and unreasonable. It sets a dangerous precedent by retrospectively changing the rules, removing tax certainty and targeting individuals who can’t defend themselves in the same way that global companies and the super-rich can. It even removes the right of appeal and the opportunity for cases to be heard in a court of law.  


“We, at Renew, urge the government to rethink this draconian legislation before further harm is done.”






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