Loan charge: Eleventh suicide linked to 'most controversial anti-avoidance measure of our time’

A HMRC spokesman confirmed to The Yorkshire Post that it had made eleven referrals to the Independent Office for Police Conduct (IOPC) where a taxpayer has sadly taken their life and had used a “disguised renumeration scheme”.

The IOPC determined an investigation should be carried out by HMRC on three occasions. The remaining eight referrals, including the most recent one, were referred back to HMRC to deal with.

The HMRC statement added: “We have undertaken a review of the circumstances of all the cases referred back by the IOPC, to identify organisational learning and to strengthen the support provided to all customers who need extra help. One review remains ongoing. None of the completed investigations or reviews have found any evidence of misconduct by HMRC officers. “

The spokesman stressed that HMRC appreciates there’s a human story behind every unpaid tax bill and it takes the wellbeing of all taxpayers very seriously.

“We recognise that dealing with large tax liabilities can lead to pressure on individuals and we are committed to identifying and supporting customers who need extra help.”

The report of the eleventh suicide overshadowed the publication of Mr McCann’s report at the time of the Budget, which the Government hopes will bring the tragic saga to a close. In January 2025, “against a background where ten individuals had taken their own lives, in whole or in part as a result of the anxiety and stress caused by the Loan Charge, and where many more were living in despair”, Mr McCann, a former president of the Chartered Institute of Taxation, was asked to carry out a further independent review of the Loan Charge by the then Exchequer Secretary to the Treasury, James Murray.

The loan charge was introduced with the aim of tackling disguised remuneration schemes; tax avoidance schemes that seek to avoid income tax and National Insurance by disguising income as another form of payment, which is claimed to be non-taxable, typically a loan. The loan charge was announced at the Budget in 2016 and introduced into law through Finance (No.2) Act 2017. Its purpose was to tackle the historical use of these “contrived tax avoidance schemes”

There was an outcry when people on modest incomes were plunged into despair as they faced large and unexpected tax bills due to the loan charge, after placing faith in their professional advisers to do the right thing. MPs uncovered evidence that, in some cases, workers were told they had to sign up to schemes which later became subject to the loan charge, simply in order to be paid. Some were told they were “QC approved” and “HMRC compliant”. A review in 2019 reduced the loan charge’s impact, but MPs and campaigners still believe it is punitive and flawed.

The scale of the problem is made clear in Mr McCann’s foreword: “My review is specifically focused on how to bring the Loan Charge to a close for those still to settle, and their families. The indirect effect on families is easily overlooked, but it is important since whilst some 45,000 or so were directly impacted by the Loan Charge, many times that number have suffered an indirect effect, in some cases leading to family and relationship breakdowns and employment difficulties

“Since 2005, scheme promoters of all sorts have been marketing abusive schemes inadvertently helped by a too-slow-to-react HMRC strategy that allowed loan schemes to spread from the larger companies to a point where they involve even relatively low paid workers in the NHS. At their peak, they denied the Government tax revenues at a time of significant economic financial stress and the promoters who marketed them knew the Government was determined to bring them to an end.”

In his report, Mr McCann describes the loan charge as “the most controversial anti-avoidance measure of our time”.

“By any standard the Loan Charge is an extraordinary statutory provision. In terms of its design, the scale of adverse reaction to it, and not least in its harmful effects upon many of those within its scope, it has gone well beyond anything we have seen.”

He added: “Since 2019, there has been little or no progress towards bringing the loan scheme scandal to a close and, without some significant intervention, the current impasse that HMRC and those who continue to have a Loan Charge liability find themselves in cannot be resolved. In 2017, HMRC set out to bring loan schemes to an end.

“However, bound to its no compromise approach, there was no exit plan, no plan B, and a plan A that was poorly thought through, unrealistic and in which many of the lessons of the past had been forgotten. And such efforts as HMRC did make to ease the overall liability were lost in the furore. As a result, both HMRC and those who remain in scope seem caught in a quagmire from which there appears to be no easy escape.”

“The fact is that the promoters intended to, and did, undermine the tax and NICs revenues ordinarily paid by those in work for their own enrichment. Often basing themselves outside of the UK, they enjoyed very substantial profits. And, whilst the schemes varied in complexity, sophistication, and value, they all shared that common objective, whether those who participated in them realised that to be the case or not. Even after the Loan Charge was announced, some promoters marketed new schemes, along with more dubious schemes intended to circumvent the Loan Charge itself, trying to squeeze even more fees from those involved. There is also criticism of the professionally qualified individuals who often failed to provide any or adequate warning to their clients that they were treading on dangerous ground and in some instances offered financial incentives to existing clients to encourage even wider use of loan schemes.”

“I hope that this report marks a turning point from which we all, and most importantly those subject to the Loan Charge, can begin a process that puts it behind us.”

In response, the Government has announced that it is accepting all but one of the review’s recommendations and in some areas is going further, including writing off £5,000 of each individual’s liability in addition to the review’s recommendations. The review recommends that the Government introduce a settlement opportunity to encourage those who have not settled their position with HMRC to do so.

The settlement opportunity will substantially reduce the amount that they have to pay, particularly those with the lowest liabilities, the Government said. Where people decide to settle, most individuals could see reductions of at least 50 per cent in their outstanding loan charge liabilities and an estimated 30 per cent of individuals could be able to settle without paying anything, according to the Government.

Instead of being charged at the tax rates that apply to the loan charge and all other income in 2019, the new offer will be worked out based on the tax rates they would have paid in the years that loans were made. The new amount will be reduced to account for historic promoter fees, up to a maximum discount of £10,000 per year that a taxpayer used a loan scheme.

Further to the recommendations in the review, the new amount will be reduced by £5,000, reducing the amount that many people could pay to zero, according to the Treasury.

The Government has also announced that no late payment interest will be charged; reducing the amount that many people affected by the loan charge could pay by around 20 per cent.

The maximum reduction for any one person will be no greater than £70,000 on what the person already owed because of the loan charge.

Mr McCann told The Yorkshire Post that he didn’t think that HMRC believed initially that the types of people affected by the loan charge would include so many people on modest incomes, whose only asset was their home.

Mr McCann said he asked challenging questions of the scheme promoters in the course of his review, one making “a not so veiled threat” that he would sue him, but that didn’t impact the way the review was conducted.

He added: “Some of these promoters were just salesmen with no tax or legal knowledge who just jumped on the bandwagon and in their promotional material made claims that were clearly untrue. The advertising standards authority should have been all over them

“But other promoters were smart, unscrupulous, guys who knew where the line was. Often buried in the middle of the documents was a disclaimer to protect the promoter.

“I can excuse the layperson but the promoters all knew that the revenue was after them.

“I don’t, however, support the view that mis-selling of these schemes was carried out by advisers on an industrial scale. From around 2005 only a certain type of adviser, often smaller firms, continued to be involved in this scandal, as mentioned in the report, the larger firms had moved away from loan schemes by 2010.

“Fees charged by firms are important in understanding the type of firm that would have been active after 2005, typical contractors would not have paid £400-£1,000 an hour plus VAT which is a typical range in medium and larger firms.

“In the course of the review, a number of accountants criticised HMRC, but I had to ask them why they thought the scheme was beyond challenge.”

Mr McCann said that he found comparisons between the Post Office scandal and the loan charge problematic.

He added: “There are some points of comparison, however anyone using a scheme subject to the loan charge who was earning more than £50,000 a year was in a quite advantageous tax position. And the schemes were intended to and did give participants 80-85 per cent of their income, tax and NIC free.”

When the review was announced a year ago, some campaigners and MPs denounced it, largely because it excluded looking at the legislation surrounding the loan charge. Critics said it was merely a review of the settlement terms and how more people could be made or “encouraged” to settle unfair and disputed demands.

Mr McCann said: “I believe a lot of the criticism which has been made of the review by the Loan Charge Action Group and the Loan Charge and Taxpayer Fairness All Party Parliamentary Group (APPG) is unjustified. Of the 32,000 open loan charge cases around 26,000 or so will see a material change for the better with thousands having no liability at all.

“It was important in the review to distinguish between the users who earned large sums and those who might be regarded as innocents abroad,’’ he added.

“I have been on HMRC’s heels about the loan charge for years; well before the APPG and LCAG. I met officials and ministers and the point I kept trying to make was that HMRC was not going to hit the targets it had set for tax collection in connection with the loan charge.

“Repeal of the loan charge was never the answer. Too many people had already settled and it wouldn’t help thousands of people who were still the subject of open HMRC enquiries.

“As a result of the review, 26,000 people affected by the loan charge are in a better place than they were before it. The remaining 6,000 cases should be easier for HMRC to deal with.”

“I hope that as a result of the review the scheme promoters won’t have the same marketing opportunities as they had in the past and taxpayers won’t believe in magic tax schemes,’’ Mr McCann added. “We need to challenge the belief that all you need to reduce tax is a smart lawyer or a clever accountant.”

He supported calls for ramping up professional standards among advisers and tougher sanctions to make future scandals less likely and believes HMRC “has genuinely learned lessons from the problems caused by the loan charge” and the review has provided it with a template to resolve these issues in future.

HMRC said it is working to deliver the new settlement opportunity, quickly, so that people with loan charge liabilities can finalise them and move on.

The statement added: “Legislation will be brought forward immediately in the Finance Bill and we will begin contacting customers to notify them of eligibility from January 2026. Any customer who wants to discuss settlement doesn’t need to wait for us to write. They can contact their named caseworker who stands ready to support them.”