Raymond Doherty 11 Sep 2019 04:17pm

Treasury launches independent loan charge review

The review into HMRC’s controversial loan charge policy will be led by Sir Amyas Morse, former chief executive of the National Audit Office

Following months of pressure from MPs, taxpayers and campaigners, the chancellor Sajid Javid has commissioned a review. While it is under way, the loan charge will remain in force.

The loan charge came into effect on 6 April and applies to anyone who used so-called disguised remuneration schemes. The legislation added a 45% non-refundable charge on all loans advanced through the schemes – some of them dating back to 20 years ago – unless the individual had agreed with HMRC to settle their tax affairs beforehand.

However, many of the 50,000 people caught up in the issue are low paid, such as nurses and social workers, and were persuaded by their employers to join the schemes. Many of them are facing bankruptcy. Yet, at the time the schemes were set up, HMRC did not question their legitimacy.

The impact of the charge has been so serious that a number of suicides have been reported in connection with the tax. HMRC reported itself to a police watchdog over one case in March.

Announcing the review today, financial secretary to the Treasury Jesse Norman said, “Everyone should pay their fair share of tax. These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the loan charge is the appropriate way of tackling them.

“The government fully appreciates the concerns expressed by individuals, campaigners, and MPs who have raised concerns about the loan charge.

“Sir Amyas is known and respected across Parliament for his expertise and independence of mind. The government looks forward to his report as it continues to tackle these and other tax avoidance schemes.”

Sir Amyas has been asked to report back by mid-November, ahead of the January self-assessment deadline.

The review will focus on the impact on those individuals who were using the schemes directly, the Treasury said.