The government set out plans in the Autumn Budget 2024 to commission another independent review of the Loan Charge policy that – in its words – will “help bring the matter to a close for those affected whilst ensuring fairness for all taxpayers”. This description was seized on by contractors in scope of the policy as a positive sign.
It’s not hard to see why. The policy is a mechanism for HM Revenue & Customs (HMRC) and HM Treasury to recoup tax that government estimates suggest around 50,000 contractors avoided paying by enrolling in loan-based remuneration schemes between 9 December 2010 and 6 April 2019.
Computer Weekly has heard and published numerous accounts from IT contractors who participated in these schemes and have been saddled with life-changing tax bills they claim to have no hope or means of paying, since the policy came into effect in April 2019.
When the government publicly committed to taking actions to “help bring the matter to a close for those affected”, there was an expectation among some of those affected that this might result in the Loan Charge being repealed and their tax bills cancelled.
That notion was firmly put to bed on 23 January 2025, when the government issued confirmation that the review had been commissioned and that repealing the policy in totality was not what it meant about wanting to bring the matter to a close.
Instead, the government said the review would focus on investigating the factors stopping people from settling their Loan Charge liabilities with HMRC – and finding ways to help them do so.
It also confirmed that HM Treasury had appointed former HMRC assistant director Ray McCann to oversee it. He has also previously served as president of the Chartered Institute of Taxation and has been in private practice for almost 20 years.
“The reviewer [McCann] is being asked to draw on the available evidence and expertise, engaging with stakeholders as appropriate, to consider in detail the settlement terms available [to those] who have not yet settled and paid their tax liabilities in full to HMRC, and whether HMRC’s settlement and debt management processes sufficiently take into account their ability to pay and behaviours,” said the government statement.
“[It will also look into] how that population could now be encouraged to reach a resolution with HMRC; and what decisions would be required to ensure that, as far as possible, any new settlement proposals were properly targeted whilst not imposing significant additional administrative burdens upon HMRC.”
Contractors revolt
Once the information about what the review would entail entered the public domain, a wave of criticism was directed at the government from those affected by the policy, with many accusing the government of offering false hope with its promise the review would bring the Loan Charge matter to a close for them.
Campaign groups have also claimed the review is too narrow in scope, given its focus on what can be done to encourage people to settle their Loan Charge liabilities, rather than examining the reasons why tens of thousands of people joined loan schemes in the first place.
During a sit-down with Computer Weekly to discuss his plans for the review in more detail, McCann says the terms of the review are wider than many people suggest.
“Everything of any significance, so far as the Loan Charge is concerned, happens in the period post-2010, so that means it’s open to me to look at anything that happens in that period, including the behaviour of the promoters and the behaviour of HMRC,” he says.
The “call for evidence” period of the review started on 28 March 2025, with McCann urging those in the policy’s scope to send him evidence covering three topics: what contractors were told by promoters of these schemes, their experience of dealing with HMRC, and details about how the policy has personally affected them.
The rationale behind that, as McCann sees it, is that it would be difficult to see how the Loan Charge can be resolved without having a detailed understanding of how so many people ended up embroiled in loan schemes and why they are finding it so difficult to reach a settlement with HMRC.
Another area that McCann plans to explore during his review is HMRC’s 2017 assessment of the impact the Loan Charge would have, in which the government tax collection agency stated that it did not foresee the policy having any “material impact” on the families of those in scope of it.
[Repealing the Loan Charge] would be a bad move because – whether people realise it or not – many individuals have got millions out of loan schemes and paid little or no tax on it Ray McCann, independent Loan Charge review
This statement has been openly criticised during the intervening years, as anecdotal accounts from contractors discussing the mental anguish of living with a sizeable Loan Charge-related tax bill hanging over them have emerged. The policy has also been linked to at least 10 suicides to date.
“I’ve been critical of [the HMRC assessment] in the past. I’ve criticised that in various formats: on Twitter, in various tax journals, publicly, and so on,” says McCann.
What is not open to McCann is to make a recommendation in his final report to repeal the Loan Charge policy. And that’s not because the contents of it are pre-determined, as some critics of the process have claimed, but because doing so would not be fair to other taxpayers.
After all, the government has previously and repeatedly stated that resolving the Loan Charge is a priority, but doing so must happen in a way that ensures fairness for all taxpayers.
“It’s not open to me to recommend that the Loan Charge be repealed, and the government has made clear from the start that repeal was not an option, and equally I don’t think it should be. It would be a bad move because – whether people realise it or not – there are many individuals who have got millions out of loan schemes and paid little or no tax on it,” says McCann.
“Government has a responsibility to the many millions who pay tax and national insurance contributions [NIC] on all of their earnings, and unless this is resolved in a way that is fair to both those affected by the loan charge and the millions of other taxpayers, many would no doubt ask why you and I should pay our tax and national insurance?”
Criticism of HMRC
As previously alluded to, McCann has proven to be a vocal critic of HMRC’s handling of the Loan Charge over the years, and was – during his time working at the government agency – closely involved in its enforcement activities against similar disguised remuneration schemes.
“I’ve been involved in [enforcement action against] loan schemes in one capacity or another for a quarter of a century. When I was in the Revenue [HMRC] in the 1990s, I was one of the first inspectors to take on one of the big employee benefit trusts [EBTs],” he says.
These trusts are the entities that pay out loans to contractors. In the late 1990s and early 2000s, many large employers in the banking and financial sector used EBTs as a mechanism to pay their employees in loans.
“One of the last things I did before I left HMRC in 2006 was pre-empt the settlement with several banks in late 2005. One of the banks that I had challenged had put a billion pounds into an employee benefit trust,” he says.
“They had claimed the corporate tax deduction for it, [but] they hadn’t deducted PAYE [Pay As You Earn] or NIC, so all told, that group of banks had avoided hundreds of millions in tax and NIC.”
During the intervening years, the profile of organisations and individuals involved in loan-based remuneration schemes has markedly changed, says McCann, to include “white collar” workers, such as financial services and IT contractors, before moving down to far lower-paid individuals, such as social workers and NHS staff.
“The thing that shocks me is how low down the income scale these things have reached. They’re like a virus. They have gone from the large corporates to the big banks to the middle-sized companies, and then down to various people working offshore, putting together schemes that are ensnaring people who are on just everyday wages,” he says.
“And that’s why successive governments have treated this as such a priority – because of the threat that they see it being towards the entire PAYE and NIC system.”
How did we get here?
Loan-based remuneration schemes enable individuals to artificially minimise the amount of employment tax they pay.
However, many of the contractors in scope of the Loan Charge policy claim the schemes were marketed as an HMRC-compliant way of bolstering their take-home pay, and that they were assured by respected tax barristers that – in the eyes of HMRC – they were doing nothing wrong.
The way McCann sees it, that explanation only goes so far. “Many people will have concerns, even if they get assurance from the promoter. And most of them did get assurances from promoters saying, ‘It’s all fine. It’s all tried and tested, and HMRC don’t mind’,” he says.
“But I think there is only so far you can believe that to be the case without evidence, and some of that has already come into the review mailbox.”
Meanwhile, HMRC maintains that its position on the use of loan remuneration schemes has always been clear, and that it has never given its seal of approval to any such setup.
“Even if you go back to 2010 and before, HMRC’s position on [the use of EBTs] was all over the internet,” says McCann. “If you did a Google search at the time on EBTs, you might get millions of hits – and most of them were about HMRC’s view on them.”
And what this serves to highlight is one of the major difficulties McCann will face in his review: uncovering evidence that supports the argument that contractors are victims of mis-selling when so much time has passed since these schemes were originally being marketed to people.
“That’s the task before me – getting sufficient reliable evidence to show that the promoters are the bad guys that I can put in my review, so I’m in a position to put forward the argument that these are the people HMRC should have been clamping down on and – where appropriate – criticising them for not doing it,” he says.
This is why it is so important that contractors engage with the review process during the call for evidence period, so their side of the story can be fully put across, he continues.
Meanwhile, McCann has been reaching out to contacts he made during his time investigating loan schemes while at HMRC, some of whom used to “sell or market these kinds of ideas”, to engage in the review too.
“I don’t need everybody to send me details in, because if all 50,000 people in scope of the Loan Charge send me their evidence, this review would take 10 years to complete. But what I do need is enough to get involved that I can sensibly make a case that this is representative of what happened,” he says.
“What I want to be able to do [with this review] is say this is representative of what happened, and it’s reasonable to conclude that within these types of industries, this is the behaviour [of] the promoters. And up to a point, it’s reasonable to conclude that the individuals involved, who often did not have independent professional help, were persuaded that this was okay.”
He also needs contractors to engage in the review by supplying a “substantial and significant” amount of evidence that proves their claims that their treatment at the hands of HMRC has been “unreasonably and manifestly unfair” in the eyes of the average person in the street who pays tax and national insurance.
“The argument you’ve got to make is that they’re being treated in a way that’s unreasonably unfair, and in a way you and I don’t support,” McCann adds.
Stakeholder engagement
When the government set out the review’s terms of reference, a group of cross-party MPs – who make up the Loan Charge and Taxpayer Fairness All Party Parliamentary Group (APPG) – issued a statement brandishing the exercise a “farce” while calling into question how truly independent the end product would be.
This was on the basis that a former HMRC director had been appointed to oversee the review, and – as confirmed by the government – HMRC and HM Treasury would be permitted to review its contents ahead of publication.
“It will not change the position people are in, nor review the legislation and whether it was fair and justified. … This is not the review that was promised nor the review that is so desperately needed, and the APPG will continue to push for a genuine inquiry into this scandal,” said the APPG.
Despite the group’s vocal critique, McCann says he has been liaising with the APPG in the wake of its statement and has found its members are broadly supportive of what it is he is trying to achieve.
He has also been engaging with various stakeholders – including noted tax barristers and accounting firms who represent large numbers of the contractors affected by the Loan Charge – to compile evidence for the review, including impact statements.
“I’ve got a big data request that I’m drafting at the moment to send to HMRC so that I can get proper data – the numbers involved, the income spread, how long people have been under inquiry for, and that kind of thing,” he says.
“I had to delay things a bit because the need to be independent means I couldn’t use HMRC and Treasury people for support, and there had to be a recruitment process across the whole of the civil service [for people to assist].”
McCann is acutely aware that the decision to appoint him, a former HMRC inspector, to oversee the review has not gone down well with everyone.
There is no way I’m going to take instruction from HMRC or the Treasury on how to conduct the review – and they have done nothing that could be taken as trying to control the review or its direction Ray McCann, independent Loan Charge review
“Some people have said that I’m under the control of the Treasury … but there is no way I’m going to take instruction from HMRC or the Treasury on how to conduct the review – and to be fair to the Treasury and HMRC, they have done nothing that could be taken as trying to control the review or its direction,” he says.
“I obviously must comply with the law on data protection and so on, but I’m going to carry out the review as I believe it needs to be done. The minister made clear that my conclusions and recommendations must be made within the constraints of the current fiscal situation, but otherwise it’s up to me.”
And for those who have taken issue with an ex-HMRC director conducting a review into an HMRC-backed government policy, McCann says his employment history and experiences should be viewed positively.
“On the point of independence, I initially thought that should be more of a concern for HMRC than people on the other side of the inquiry, because for eight years I’ve been consistently critical of their handling of the Loan Charge,” he says.
One area that McCann has been particularly and publicly critical about HMRC over is the organisation’s approach to Loan Charge settlements.
“I have been pressurising ministers and HMRC for years to develop a better approach to settlements, and I got frustrated with the fact that it never appeared, so I started to publicly criticise them through Twitter and LinkedIn, and in various things I was writing,” adds McCann.
“Almost every article I’ve written in the last eight years mentions the Loan Charge to some extent or another, and it’s always been critical of HMRC’s approach to settlements. I’ve been consistently critical on that front, [and] I’ve made it clear to Parliament, and I’ve made it clear to government, that HMRC should have been more realistic when it came to the settlement terms.”
In terms of what he thinks HMRC should have done differently, McCann says: “I have said in the past that HMRC should have offered settlement terms that were sufficiently attractive that it made people want to settle, but what HMRC did was only give the slightest of discounts [to people who wanted to settle] and left them in a position where they did not know how they would pay.”
It is McCann’s hope that when the review concludes – which is expected to be later this summer – and its contents have been mulled over by the government, contractors will end up with a far more attainable settlement figure.
“I want to end up with a situation where people get a settlement figure from HMRC that they can look at and say, ‘Well, okay, even if I’d rather not pay it, I can pay it, within a reasonable period if necessary’. Whereas, presently, people are saying, ‘I’d rather not pay it, but even if I did want to pay it, I can’t afford to’. I want to change that dynamic,” says McCann.
And in doing that, he hopes this will finally help bring a resolution for the tens of thousands of people who have been living under the shadow of the Loan Charge for the past eight or so years.
“We can argue that HMRC should have gone after this promoter or that promoter, and all manner of other things to do with the Loan Charge, but that doesn’t help someone who is sitting at home worried about the bailiffs coming round,” he says.
“If someone’s drowning in a river, they’re not going to be helped if people are just standing on the shore arguing about how they got in the river in the first place. They just want someone to rescue them.”
In the meantime, McCann’s priority is getting people affected by the Loan Charge to contribute to the review.
“I know people are mistrusting [after past reviews]. Whether that mistrust is justified or not, I want them to take a deep breath and engage with this review because something has to come out of it as we all need this resolved,” he concludes.
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