Loan Charge: Independent Review

Thursday 23rd January 2025 Written Statements

[The Exchequer Secretary to the Treasury (James Murray)]

At the Budget, the Government announced that they would commission an independent review of the loan charge to help bring the matter to a close for those affected while ensuring fairness for all taxpayers. Today I can set out further details about the review.

The loan charge was intended to tackle historical use of contrived tax avoidance schemes that seek to avoid income tax and national insurance by disguising remuneration as a form of non-taxable payment (typically a loan). 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 Government believe 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.

However, the Government recognise that concerns continue to be raised about the loan charge. In particular, 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.

I have therefore asked Ray McCann, a former president of the Chartered Institute of Taxation, to conduct a review into the barriers that are preventing those subject to the loan charge from reaching resolution with HMRC and to recommend ways in which they can be encouraged to do so.

The objectives of this review are to help bring the matter to a close for those affected; ensure fairness for all taxpayers; and ensure that appropriate support is in place for those subject to the loan charge. The full terms of reference for the review have been published here: www.gov.uk/government/publications/independent-review-of-the-loan-charge.

The review will commence on 23 January 2025 and I have asked Mr McCann to present his final report to me by summer 2025. I will provide a further update to the House after I have received that report.

[HCWS386]