'This is indefensible': MPs say Government must adjust all loan charge settlements in accordance with review

Last year, the Government commissioned Ray McCann, former President of the Chartered Institute of Taxation, to lead a new independent review of the loan charge.

The charge was designed to tackle historical use of contrived tax avoidance schemes that seek to avoid charges of income tax and National Insurance by disguising remuneration as a form of non-taxable payment, typically a loan.

People on modest incomes who had placed their faith in professional advisers were plunged into despair as they faced large and unexpected tax bills due to the loan charge.

The McCann review was published at Rachel Reeves’ November Budget, alongside the Government’s response. The Government announced that it accepted all but one of the review’s recommendations and in some areas was going further, including writing off £5,000 of each individual’s liability in addition to the review’s recommendations.

Steve Packham, Spokesperson for the Loan Charge Action Group, said the McCann Review has concluded that the previous settlement terms were unfair and unreasonable, yet “disgracefully the review was designed to ignore those who settled on these terms”.

“Ray McCann has acknowledged that the previous settlement terms were unduly harsh, a “punishment strategy”, so it is completely wrong that his review excluded all these people.”

In excluding those who have settled, the McCann Review has created a new injustice within the whole loan charge scandal, said Mr Packham

“Many of those who settled previously did so under duress and because they believed they were told they would otherwise face far higher bills.

"There are also thousands of people who were engaged in settlement discussions with HMRC, for many months and even a couple of years, who were prevented from settling due to HMRC delays and incompetence or because HMRC’s demands were simply unaffordable.

"All affected should be offered the same terms, regardless of settlement status or the years affected. There are many Loan Charge Action Group members who were pushed into settling, on unfair terms, and LCAG is committed to push for a just resolution for them and for everyone affected by the loan charge scandal.

"We will keep campaigning until everyone is treated equally and until the nightmare of the whole fiasco is over for all affected”.

Greg Smith MP, Co-Chair of the Loan Charge and Taxpayer Fairness APPG, said it was outrageous that those who took the difficult decision to settle with HMRC, “which is what HMRC was telling people to do”, are now being punished for having done so.

He added: “Time and again HMRC and Ministers advised people to settle, telling them that it would be better for them if they did. Yet now, with the new McCann Review settlement terms being denied to them, they are facing a worse outcome – for doing precisely what HMRC was pushing them to do.

"This is absolutely indefensible and the Government must do the morally and legally right thing, by adjusting all loan charge-related settlements according to the McCann Review terms.”

One woman affected by the loan charge told The Yorkshire Post that she believed the McCann review presented a fair and balanced approach. However, she added: “In January 2025 I agreed settlement and a time to pay arrangement stretching out five years – incurring more interest – but at a life impacting level.

"I settled despite punishing and, in my opinion unfair levels of interest and penalties as I felt I had no choice – I could no longer argue the case – my professional advisors had walked away, money and mental health were exhausted.

"I am not trying to avoid paying tax due, I merely object to punitive interest.. and to punitive penalties when I have at all times only followed advice from professionals and have taken every conceivable step as a non-professional to ensure they are legitimate.”

An HM Treasury spokesperson said: “We launched this review, independently led by Ray McCann, to bring this matter to a close for those affected whilst ensuring fairness to all taxpayers.

"Ray conducted a thorough and comprehensive examination of this issue, and we have accepted all but one of his recommendations in full. In some places, we have gone further than the review recommended, including writing off an additional £5,000 from people’s remaining liability, meaning around 30 per cent of individuals could have their liabilities entirely written off.”

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 also 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.

No late payment interest will be charged, reducing the amount that many could pay by around 20 per cent, the Government said in November.

Any inheritance tax already due because of the use of loan schemes covered by the settlement will be written off and where a person is unable to pay the new amount in full immediately, HMRC will agree a payment arrangement tailored to their ability to pay; anyone can decide to pay the new liability over five years, without having to discuss affordability with HMRC, the Government said. Forward interest will apply as normal if a person decides to pay via instalments.

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.

Promoters of tax avoidance schemes will also not be able to access the new settlement opportunity.