The UK Government has committed to writing off thousands of pounds of outstanding payments to anyone remaining within the scope of the law. Loan fees in response to the latest independent review of the controversial hidden fee policy..
The retroactive tax policy has left thousands of IT contractors living in the shadow of life-changing tax bills since it took effect in April 2019. who previously participated in credit-based remuneration schemes between December 2010 and April 2019..
Scheme participants are usually paid partly for the work they do in the form of tax-free credits, allowing participants to supplement their take-home pay. The loan levy policy was introduced to recover tax that participants in the scheme avoided paying. However, critics of the policy claim that it fails to take into account the fact that before and during the time period covered by the credit charge, many of these schemes were mis-sold to participants as a means of allowing contractors to increase earnings “equivalent to HM Revenue and Customs”.
As Computer Weekly previously reported, the government outlined plans in Autumn Budget 2024 commission an independent review of the policy to “help resolve this issue for those affected while ensuring fairness for all taxpayers.” This was the second independent review of the policy carried out by a former HMRC assistant director. Ray McCann appointed by the UK Treasury to oversee the processstarting with a call for evidence in March 2025.
On the same day as the 2025 Autumn Budget.The contents of McCann's review were published, in which he made nine recommendations which he said would “create a means by which anyone who wants to settle their tax position by agreement with HMRC will be able to do so.”
As McCann's review states: “His method, as part of a structured resolution approach, is to use a series of standard adjustments to suspend a portion of a person's current liabilities which, if the conditions of the suspension and payment plan are met, will be written off over time.”
This approach, he continued, aims to encourage people to reach an agreement with HMRC and deter them from further involvement in tax avoidance schemes.
“The review recommends a new settlement approach which suspends (subject to conditions) part of the total tax payable to allow for the proportion of income received [loan scheme] promoters and further suspends a portion of the total liability equivalent to late payment penalties and interest,” McCann said in its review.
Some recommendations from the McCann review include:
- Individuals work with HMRC to agree a reduced settlement amount, with the difference in their current loan liability suspended and eventually written off, subject to the conditions of the suspension being met.
- Late payment interest on outstanding loan payments should be suspended, as should up to 10% of gross scheme income for the tax year to account for fees paid.
- Payment plans of up to five years must be offered by HMRC by default, but HMRC also have the option to approve repayment plans of 10 years.
In its response to McCann's review, the government said it “accepts all but one of McCann's recommendations” and would “in some cases go further” by proposing to write off the first £5,000 of each person's outstanding loan liability.
The only recommendation in the McCann report that the government has said it will not implement is that the time to repay loan payments could be extended to 10 years with HMRC approval. This recommendation further states that if a person is unable to repay their obligations within this period of time, “as a measure of support, the remaining balance may be suspended.”
In response, the government said it would be willing to give those covered by the policy more than 10 years to pay off their obligations, but did not accept the recommendation to suspend remaining obligations if people were unable to pay within 10 years.
“The Government considers that this recommendation will lead to unnecessary, potentially protracted engagement between HMRC and taxpayers regarding payment plans and will not support the aim of drawing a line under this issue,” the Government’s response said. “However, the government is committed to making the existing process clearer for taxpayers who cannot afford to pay.”
Overall, McCann's settlement recommendations would “substantially reduce the outstanding liabilities of those who have yet to pay HMRC,” the government said in its response, adding: “Most people will be able to see their outstanding loan liabilities reduced by at least 50%, and an estimated 30% of people could see these liabilities written off entirely.”
He also said he would push ahead with legislation in the upcoming Finance Bill to ensure McCann's recommendations come into force.
However, despite the positive impact the government said the settlement reforms would have on those affected by the Levy Charges Act, a group of cross-party MPs operating as the All Party Parliamentary Group on Loan Charges and Taxpayer Fairness (APPG) criticized the contents of the McCann review, calling its recommendations “discriminatory and unfair”.
Greg Smith, Co-Chair Loan Fee and Taxpayer Fairness APPGsaid the review also failed to “adequately acknowledge the industrial mis-selling practices” that contributed to so many people violating the policy in the first place.
“Chancellor [Rachel Reeves] last year itself admitted that instead of going after victims of mis-selling, HMRC should go after the perpetrators. But instead the government ordered a very limited review that did not even consider the issue,” Smith said.
“While the concessions are a step forward and will help some of those involved, they will not end the nightmare for others and will fail to hold HMRC to account for its clear failures and decision to so ruthlessly discriminate against people who have been victims of mis-selling, leading to 10 and now possibly 11 suicides.”
Smith added: “There still needs to be a proper independent investigation, which, unlike the McCann Review, should be effectively independent of HMRC and not carried out by someone who used to work there.”
Meanwhile, campaigners from the Credit Charges Action Group (LCAG) also expressed their disappointment at the contents of the review, which they described as too narrow in scope and “clearly not independent” due to McCann's previous work at HMRC.
LCAG spokesman Steve Packham said the recommendations would help reduce the liabilities people face but would not resolve the “thousands of cases” that will remain open for a long time.
“There are many people [in scope of the Loan Charge] who have now lost income due to Covid, IR35 changes and mental distress caused by loan payments. There are many people who will continue to face unaffordable bills, which will likely mean further bankruptcies and more misery,” he said.
This is despite Rachel Reeves herself calling on HMRC to target perpetrators rather than victims last year.
“The review also does not include those who were forced to pay compensation under duress by HMRC, meaning they will end up paying more than those who did not, which is grossly unfair when HMRC ordered them to pay compensation and threatened them with much higher demands if they did not. There still needs to be a proper and truly independent investigation into all of this. Only this can resolve the loan payments scandal and reveal the truth about this whole fiasco.”
