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The LCAG reports follow exclusive reports from Sky News. The first exposing the role of recruiters, the second exposing the role of accountants, showing that both played a key role in pushing people towards promoters of schemes that are now subject to the Loan Charge.

At the heart of the Loan Charge Scandal is the fact that HMRC and the Government have ruthlessly pursued those who followed professional advice, but have done nothing to pursue those who systematically mis-sold schemes, that are now subject to the Loan Charge.

The mis-selling on the part of those who promoted and operated the schemes has been well-documented, most notably in the damning report by Tax Policy Associates published in January 2024.  However, mis-selling by other parties and professionals has been much less documented, hence the new reports into the largely ignored roles of accountants and recruitment agencies.

Now after months of research, the Loan Charge Action Group can expose the extent of this involvement and how crucial recommendations from accountants and recruitment agencies resulted in thousands of people using schemes they were told were compliant.  

LCAG has published two reports, based on extensive evidence and with numerous case studies, one regarding the role of recruitment agencies, and the other regarding the role of accountants:

Accountants/Chartered Accountants and the Loan Charge Scandal

The report on accountants shows that accountants, including chartered accountants, were regularly and routinely advising their clients to use schemes now subject to the Loan Charge, schemes that HMRC claims “never worked”.

The report has exposed:

  • That accountants referred clients to schemes on an industrial basis. The evidence the Loan Charge Action Group has compiled clearly shows that hundreds, possibly thousands, of accountants were recommending schemes to clients and in many cases, telling them not to use a limited company, but to use the scheme instead. One accountant revealed that one well known scheme, AML, had 450 accountancy firms signed up to recommend it to clients.
  • That accountants benefitted financially from recommending schemes and received substantial commissions/fees for doing so. In one case, an accountant asked the promoter by email for their fee to be added on top of the promoter’s fee, to which the promoter agreed.
  • In many cases, these payments were not declared to the client – which exposes an undeclared conflict of interest and a failure to act in clients’ interests in place of seeking monetary gain.  
  • Worse still, many accountants were actually working directly with promoters, acting as their salespeople, including hosting events to introduce new clients.
  • In some cases, accountants had an ongoing financial interest in the schemes, on top of fees for clients signing up to them, so making money from their clients’ continued use of them.
  • Accountants also paid referral fees to clients to recommend them/the scheme to colleagues to encourage them to recruit more people to join the scheme, thus generating more commission for themselves.

When later hit with the Loan Charge, some contractors took their individual cases to accounting governing bodies, questioning the advice that has landed them with life ruining tax bills. Yet in every case where a client has brought a complaint, accounting governing bodies have ruled in favour of their members.

HMRC claims it “was always clear” that these schemes never worked, in which case they would surely have warned accountants not to recommend them and if they did, accountants were giving negligent (and possibly criminal) advice. Instead, HMRC ruthlessly pursues those that Ministers have acknowledged as “victims of mis-selling”.

Recruitment Agencies and the Loan Charge Scandal

The report on recruitment agencies shows that they were directly involved in the Loan Charge Scandal, recommending umbrella companies or payroll intermediaries that led to people facing life-ruining retrospective tax bills.

Many of these agencies, including leading ‘blue chip’ names in recruitment, directed their clients to umbrella companies who then recommended that they use schemes now subject to the Loan Charge. Recruitment agencies have directed people to just one umbrella company as their recommended payroll solution or provided them with a preferred supplier list (PSL) which was a list of approved umbrella companies/payroll providers. In some cases, the recruiter directly recommended the remuneration scheme or drew attention to them.

The report has exposed that:

  • In many cases, umbrella companies recommended by recruitment agencies were directly linked to ‘disguised remuneration’ schemes either directly or through their directors. This was not known to those being advised to use them.
  • Recruitment agencies – and individual recruitment consultants – were taking commissions and other incentives (‘kickbacks’) from these umbrella companies and payroll schemes for recommending clients to them.
  • Contractors and freelance workers had absolutely no idea of these ‘kickbacks’.
  • The umbrella companies that gave the best ‘kickbacks’ to recruiters were the ones linked to payroll loan schemes.
  • In some cases, freelance workers coming to the UK from overseas were told by large global recruitment firms that they should work through a payroll loan provider, to be compliant with UK tax law. Inevitably these workers believed and trusted this advice and then several years later found themselves facing life-ruining tax bills for doing so.
  • People employed through the Government’s own recruitment framework now face the Loan Charge, having been recommended to use umbrella companies and payroll providers who were on the approved supplier list – and therefore approved by Government. One of the case studies included is someone who worked for HMRC for four years, having been recommended an umbrella company by the Government approved recruitment agency.
  • There are also many workers, including those who are lower paid for example social workers, amongst other professions, who found employment through Council approved recruitment agencies and then were recommended to use what turned out to be rogue umbrella companies who put them unwittingly into ‘disguised remuneration schemes.’

Astonishingly, none of these Government/public sector approved recruitment agencies have been subject to any investigation, instead HMRC and successive Governments have turned a blind eye and continued a strategy of ruthlessly pursuing the workers who followed the recommendations of these approved providers.

Government review into settlement terms ignores the perpetrators of mis-selling

At the heart of the Loan Charge Scandal is the fact that the whole approach taken by HMRC and successive Governments has been to ruthlessly pursue the victims of mis-selling, whilst doing nothing about the perpetrators of mis-selling, not only promoters, but as these reports shows, accountants and recruitment agencies. 

Despite the fact that some accountants and recruitment agencies are now directly responsible for their clients facing the Loan Charge, they have faced NO action from HMRC or Government, nor have promoters or umbrella companies. None of these parties that profited from the mis-selling of these schemes have been asked to pay a penny of the disputed tax, despite the fact that HMRC had a legal duty to collect the right amount of tax from agencies at the time under the ‘agency rules’ – but they failed to do so.

By ignoring the role played by accountants, recruitment agencies, umbrella companies and scheme promoters, HMRC has tried to cover up its own failures by instead ruthlessly pursuing individual workers and small company directors, with ten confirmed suicides and thirteen attempted suicides of people facing the Loan Charge.

The LCAG reports also further expose the disgraceful decision by the current Government to commission only a very restricted review, that doesn’t include a proper examination of the role of accountants, recruiters, promoters and umbrella companies (and rules out recommendations to pursue them for any of the disputed tax).

Treasury Ministers had promised a fresh, truly independent review into the Loan Charge and yet then broke this promise, by announcing a review that looks only at settlement terms, conducted by a former Assistant Director of HMRC, which leaves the Loan Charge in place and thus only pursues individuals affected.  This is despite Rachel Reeves saying in an interview “Who are the real culprits here? It’s people who mis-sold products”. Despite this, the Government continues to do nothing about those responsible for the mis-selling of schemes now subject to the Loan Charge.

What is clearly needed is a genuinely independent review/inquiry that takes proper account of the roles of all parties. A genuine inquiry would look at the role of accountants, recruiters, umbrella companies, promoters and end clients (which in many cases actively pushed for people to work as contractors/freelancers, to avoid employers’ taxation as well as employee rights and benefits). It would also look into HMRC’s own inaction and failures, not only failing to warn individuals, but also to stop accountants recommending schemes.

Steve Packham from the Loan Charge Action Group said:

“It has now been exposed that many accountants and recruitment agencies had a direct role in the Loan Charge Scandal, along with promoters and rogue umbrella companies. There are thousands of people who are facing the Loan Charge simply because they took the professional recommendation of a chartered accountant or a recruitment consultant, who they often did not know was taking a commission for the recommendation.  People had every right to assume they were being given dependable professional advice. Instead, recommendations were being made cynically, due to the kickbacks these professional advisers were receiving.  It has also now been exposed that hundreds, if not thousands of accountants, were working directly with promoters to sell schemes and profiting handsomely for doing so. Many accountants, including chartered accountants, were not acting in their clients’ interests at all, they were actually acting as salespeople for scheme promoters. Yet this has so far been ignored by HMRC, by Ministers and by accounting sector bodies, all of which have chosen to look the other way.    Even more scandalous is the fact that many public sector workers have ended up facing the Loan Charge having been employed through Government and local authority approved recruiters. Contract workers, including those working for HMRC and the Treasury, were also put into schemes which are now subject to the Loan Charge. HMRC failed to act or warn people and now these workers, including many low paid council workers, face life-ruining bills they cannot afford.  It is a disgrace that the Labour Government has deliberately ignored all of this and instead have commissioned a very limited review only into individual settlement terms, by a former Assistant Director of HMRC.  Both the Chancellor and the Chief Secretary to the Treasury described those caught up in the Loan Charge Scandal as ‘victims of mis-selling’ then went on to announce a sham review that fails to investigate the mis-selling and rules out action against those involved in it.   The involvement of accountants and recruitment agencies must be properly investigated, along with the role of promoters, umbrella companies and employers. The wholesale failure of the Government’s own recruitment framework must be fully and properly investigated. Regardless of what the McCann Review recommends with regard to settlement terms, there must be a proper inquiry into the whole Loan Charge Scandal that looks at the industrial mis-selling of these schemes and the clear failure of HMRC and professional bodies to stop it”.

 

ENDS