The government has commissioned a new independent review of the Loan Charge.
At Autumn Budget 2024, the government committed to an independent review of the Loan Charge to help bring the matter to a close for those affected whilst ensuring fairness for all taxpayers.
On 23rd January 2025, the Exchequer Secretary to the Treasury made a Written Ministerial Statement announcing that Ray McCann, a former President of the Chartered Institute of Taxation, would lead the review.
The review is to examine the barriers preventing those who are subject to the Loan Charge but have not already settled and paid their tax liabilities in full from reaching resolution with HMRC. It will recommend ways in which they can be encouraged to settle with HMRC.
The reviewer will report and present their recommendations to the Exchequer Secretary to the Treasury by Summer 2025. The terms of reference set out the context, scope, and objectives of the independent review in further detail.
The review team can be contacted at contact@lcreview2025.org.uk.
You can find information about HMRC’s operational activity during the review.
So what is the Loan Charge thing all about?
Payments to individuals had been changed from pay subject to tax and NI first certain individuals and their tax affairs to the loaning of amounts of money, so not treated as income. The challenge is that there was no requirement to repay these loans and were seen as a means to avoid paying Income Tax and National Insurance hence denying funds that cover government spending on health , education, defence and etc.
These Disguised remuneration schemes have been considered by the courts. In the most notable case in 2017, the Supreme Court agreed with HMRC that schemes that redirect earnings and ultimately pay them in the form of loans do not succeed in avoiding tax.
In a further decision in 2022, the Court of Appeal confirmed that even where other parties (such as employers or agencies) have obligations to operate PAYE, the liability for income tax is that of the employee.
The Loan Charge was announced at Budget 2016 and introduced into law through Finance (No.2) Act 2017. Its purpose was to tackle historical use of contrived tax avoidance schemes that sought to avoid income tax and National Insurance by disguising remuneration as a form of non-taxable payment (typically a loan).
The government believes that 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.
PAYadvice.UK 28/1/2025