LCAG Media Release 4th December 2018


A powerful House of Lords report has laid bare the reality of the disgraceful implementation of the 2019 Loan Charge.  The HoL delivered damning criticism of HMRC actions across a whole range of areas with their actions undermining the rule of law and basic fairness. The report by the House of Lords Economic Affairs Committee said that they were given “disturbing evidence” on the government’s approach to the Loan Charge and cited reports of, “increasingly aggressive behaviour towards taxpayers”.

The report clearly concludes that the Loan Charge is indeed retrospective, putting paid to the nonsense peddled by ministers claiming otherwise. As the report unequivocally states,

The loan charge is, however, retrospective in its effect. Parliament has laid down time limits for tax matters of four, six and 20 years which give certainty to taxpayers about their affairs. It undermines this framework to artificially trigger a future charge”.

It also is strongly critical of the overall impact of the Loan Charge where it says;

“In its retrospective effect, and its failure to pursue taxpayers proportionately to their circumstances, HMRC’s approach to the loan charge diverges substantially from the principles in the Powers Review”.

The committee has called for immediate changes to the Loan Charge legislation to amend it to;

“exclude from the charge loans made in years where taxpayers disclosed their participation in these schemes to HMRC or which would otherwise have been “closed” and has called for HMRC urgently review all loan charge cases where the only remaining consideration is the individual’s ability to pay”.

The shocking reality of HMRC’s aggressive and unreasonable pursuit of people was also clearly outlined in many witness statements, leading the Committee to conclude;

“We were disturbed to hear accounts of HMRC threatening individuals with arrangements that could result in bankruptcy, where individuals clearly have no assets to settle liabilities. Whether these threats were explicit or perceived, they have caused considerable anguish for a number of individuals”.

One case presented to the committee was of a social worker who was made redundant by her local council. The evidence stated;

“I had a farewell party on the Friday, and on the Monday they said ‘If you join this agency and use the scheme, we will re-engage you as a contractor. She was re-engaged as a contractor for five years but at the end of the five years, the council told her it would re-employ her as an employee, which it did. She was unaware of what was going on. She now faces a loan charge equal to probably a year and a half’s salary. She has no means of paying it.”

The report exposes the reality of HMRC’s approach of aggressively and often unreasonably pursuing the “low hanging fruit” presented by individual taxpayers whilst also claiming to be going after promoters of schemes, despite failing to provide any evidence of doing so. The committee found;

“In the absence of publicised actions, HMRC appears to be prioritising recovery of tax revenue over justice by targeting individuals, rather than promoters (who could be considered more culpable), so it can more easily recover liabilities”.

The report also criticises both the Loan Charge and HMRC for pursuing the types of people that are caught by the Loan Charge and failing to accept that many were pushed into these schemes. The report concludes;

“In many circumstances, individuals were being directed to use these schemes by their employer, who would have been in a better position to determine the consequences for the employee of taking a loan. It is unfortunate that the loan charge does not discriminate for different intents and circumstances”.

They also backed calls made by the Loan Charge Action Group and by MPs for HMRC to establish a dedicated helpline to give those affected by the loan charge.

The report also criticises HMRC’s past failure to make its position on the schemes clear enough as well as the unreasonable delays in legislating and in failing to progress those enquiries which were opened into individuals’ tax affairs, depriving them of certainty even in situations where they were actively seeking to engage with HMRC to finalise matters.

Alarmingly the HoL also state that;

“There is some evidence that Parliament did not adequately scrutinise the loan charge”.

The committee have recommended that all HMRC determinations and notices should be appealable to the tax tribunal saying;

“This is central to the protection of the taxpayer and the balance between taxpayer and tax authority”.

It also recommends that the Accelerated Payment Notice/Follower Notice legislation be amended to include a right of appeal to the tax tribunal. The report has demanded a review of HMRC and its powers and for new parliamentary oversight of HMRC to better prevent this kind of behaviour.

The committee are also damning of the refusal of Mel Stride MP to appear before the committee stating;

“The Financial Secretary to the Treasury’s refusal to give oral evidence on this inquiry also suggests a disrespect for parliamentary oversight on issues of tax administration from the Treasury”.

Lord Forsyth of Drumlean, chairman of the committee, said;

“This is devastating the lives of middle and lower income individuals, from the private and public sector (including the National Health Service) who used disguised remuneration schemes, in many cases being required to do so by their employers.

The charge is retrospective in its effect, claiming tax from years which should be closed to enquiry.”

Richard Horsley, spokesperson for the Loan Charge Action Group said;

“The House of Lords Committee report lays bare the reality of HMRC’s aggressive and unfair pursuit of ordinary hardworking people, whilst utterly failing to take any action against those who promoted schemes that are now subject to the Loan Charge.

It also exposes the fact that both HMRC and the Treasury are simply not being honest about this as well as HMRC’s attempts to pretend they are fair and helpful to those facing the Loan Charge, when thousands of victims know the opposite is the case. The report confirms that despite the Treasury and HMRC’s attempts to distort the truth, the Loan Charge is clearly retrospective and as such undermines the basic principles of justice.

The Loan Charge Action Group commend the committee for this powerful report and exposing the reality of the 2019 Loan Charge which, if it not changed, will destroy lives.

It’s time for a bit of honesty from Treasury ministers who need to accept that they got it wrong when they introduced this ill-considered, unfair, retrospective tax grab and to listen to this new report and urgently change the legislation before it does huge damage to individuals and the economy.”

Notes to Editors

Media Contact: Mark Sebright – [email protected] / 07504 042613

1. The full report is here 4th Report – The Powers of HMRC: Treating Taxpayers Fairly

2. About the Loan Charge Action Group: The Loan Charge Action Group seeks to raise awareness and reform of the retrospective IR35 tax charge introduced by HM Treasury in the 2017 Budget and build a community where affected individuals can find information and support. The Group does not provide any form of chargeable service or professional advice. Visit

3. LCAG members’ survey: In summer 2018, LCAG surveyed 500 of its members about the impact of the Loan Charge and the following were the responses as to how if was affecting people:

Depression / Anxiety / Mental health impact: 68%
Bankruptcy: 71%
Loss of residence / home: 49%
Divorce / Relationship breakdown: 31%
Loss of career: 30%
Suicidal thoughts / self-harm: 39%

4. House of Commons Early Day Motion 1239: That this House expresses its concern at the 2019 Loan Charge; notes that it is retrospective applying back to 1999; further notes that as a result of the introduction of IR35, umbrella companies were set up and recommended by professional advisers and employment agencies; recognises that the Charge will affect contractors, freelancers and agency workers, including social workers, supply teachers and bank and locum nurses and doctors; notes that employment was not an option and in some cases the company or organisation insisted on those arrangements, including to avoid paying National Insurance; notes that these individuals did not receive sick or holiday pay; believes it is unfair that HM Revenue and Customs (HMRC) are pursuing people who acted in good faith rather than the client organisations, agencies or umbrella companies all of whom benefited significantly; notes that HMRC are aggressively pursuing individuals through Advanced Payment Notices with no independent right of appeal; further believes that the Charge is likely to cause financial distress and bankruptcies, impeding HMRC’s ability to recover these tax liabilities and causing a devastating impact on people; believes that retrospectively taxing something that was technically allowed at the time, is unfair; calls on the Government to revise the legislation to avoid significant damage to independent contractors and freelancers in the UK; and calls for the Charge to apply only to disguised remuneration loans entered into after the Finance Act 2017 received Royal Assent. For full register of MPs supporting Parliamentary motion see

5. Suicide risk – HMRC and HMT are aware of the suicide risk being created by the Loan Charge (as reported in the Evening Standard, yet so far have refused to set up a 24 hour helpline for people needing urgent counselling, see