Why the Loan Charge scandal isn’t going away

In the late 1990s, loan-based remuneration schemes began to emerge before becoming widespread among contractors and freelancers during the 2000s. The details of these ‘loan schemes’ were often opaque, but they all offered one enticing benefit. Those who signed up would be left with more in their pay packets every month.  

Umbrella companies, accountants, financial advisors and even law firms all promoted the schemes, which they claimed were entirely above board. Thousands of casual and freelance workers signed up.  

For many, the decision to do so would prove fateful, with repercussions that haunt them to this day. 

This is a human story and at times a tragic one. Campaign groups say that 11 people have taken their own lives because of debts incurred by HMRC’s imposition of the retrospective ‘Loan Charge’ – an attempt to recover unpaid taxes associated with the schemes. Many others have faced financial ruin. There is now a cross-party parliamentary group dedicated to the issue, as well as a campaigning pressure group. 

Their efforts helped persuade the government to order a review of the loan charge in 2025 but, according to campaigners, it has achieved little. More recently, the independence of the review and of its chairman has been called into question. 

So where are we now with the Loan Charge? In the rest of this article we’ll trace the past, present and future of the ongoing scandal. 

The loan charge: a potted history 

Tens of thousands of contractors and freelancers eventually joined loan-based remuneration schemes promoted by umbrella companies, accountants, financial advisors and specialist scheme providers.  

The schemes paid salaries as loans, structured in a way that meant they would never be paid back. Loans were not considered income, meaning recipients largely avoided paying tax and National Insurance (NI) on their earnings. 

These were disguised income schemes, which are tax avoidance arrangements. But they weren’t described as such by those promoting them. Many freelancers were persuaded to join loan schemes by people who they considered trusted financial or legal professionals.  

And, while the schemes attracted freelancers from a broad swathe of sectors, a significant proportion of them worked as contractors in the NHS or social services. Supply teachers, IT contractors and those working in the oil and gas sector also commonly used the schemes.  

For obvious reasons, agency nurses, porters and cleaners were attracted to payment arrangements that seemed to leave more pay in their pockets, especially when they were assured that the schemes were entirely legitimate. 

A retrospective punishment 

HMRC regarded the schemes as tax avoidance arrangements that did not achieve the tax treatment their promoters claimed. Many participants, however, believed they were entering into legitimate arrangements after receiving professional advice.  

In April 2019, the Loan Charge officially took effect, which was HMRC’s attempt to claw back unpaid income tax and NI from those using them. Because it was applied retrospectively, thousands of people were suddenly left with huge, almost unpayable bills.

In many cases, these were life-changing amounts of money. Stories of the human toll the Loan Charge has exacted are often harrowing.  

HMRC treated all loans received from the arrangements as taxable income in the 2018/19 tax year. Many contractors who believed their tax affairs were settled suddenly faced substantial tax demands almost overnight. 

Did they bring this on themselves? Some contractors may have known what they were getting into and did so willingly. But many only joined the schemes because an accredited professional told them the arrangements were OK. In some cases, the schemes were erroneously marketed as HMRC-compliant. In others, remuneration by loan was a condition of the work contract.

An injustice in retrospect 

The sense of injustice felt by those affected is twofold. First, the retrospective nature of the Charge is hard to justify. Campaigners argue that the Loan Charge retrospectively imposed tax on arrangements that participants believed were compliant at the time.  

HMRC disputes this characterisation, maintaining that the payments were always taxable earnings and that the Loan Charge was introduced to help recover tax that was always due. But – for those impacted by the Loan Charge – the suspicion lingers that HMRC is punishing contractors for its own failure to close a tax loophole sooner.  

Second, very little has been reclaimed from the promoters of the schemes. Many of these businesses made huge sums in fees and then effectively disappeared. To an indebted contractor, HMRC appears to be aggressively pursuing easy targets while those who designed and promoted the schemes face far more limited consequences. 

Reviews into the Loan Charge 

The Loan Charge was immediately controversial and remains so today. More than 200 MPs from across the political spectrum have come out in support of debt-ridden contractors.   

In response, an independent review of the Charge was conducted by Sir Amyas Morse in 2019. This concluded that the Loan Charge should only be applied to those who signed up to a loan scheme after December 2010, taking around 10,000 individuals out of the scope of the Charge.  

That still left tens of thousands of people who had used schemes after 2010 facing life-changing debts. Eventually, another review was ordered, chaired by Ray McCann, a former President of the Chartered Institute of Taxation. Its results were published in 2025. 

The McCann controversy 

If the government hoped the McCann review would draw a line under the Loan Charge issue, they have been disappointed. 

Campaigners claim the review was undermined by its own limited terms of reference. It was designed to look at barriers preventing those owing money from reaching a resolution with HMRC. It was not designed to challenge the legitimacy of the Loan Charge, or of the retrospective nature of the punishment. 

The review’s recommendations include more flexible payment terms and deductions that reflect fees paid to promoters. It concludes that tax due should be calculated using the allowances and rates applicable for each year, reducing bills in many cases.  

But it still leaves thousands of contractors struggling with huge debts and again lets firms that promoted the schemes off the hook.   

To top it all, campaigners against the Charge have recently questioned the review’s independence, citing Ray McCann’s previous work for HMRC and his public statements – often through social media – on the Loan Charge scandal.  

Where are we now?  

And so the debate rumbles on, though there is no indication that the government is prepared to make any further concessions. For many of those facing the Loan Charge, their only remaining option may be to settle with HMRC based on the McCann review’s more favourable terms. Payment plans can help spread the pain.  

For others, the McCann review is too little, too late. They carry too much debt. Many are now retired or close to it. The review’s limited scope may have dashed any hope they had of ever being free from the Loan Charge.   

Changing times 

The scandal probably couldn’t happen today. HMRC now claims to actively challenge loan schemes wherever it finds them. In 2026, no financial advisor with a reputation worth protecting would recommend disguised income arrangements to their clients.  

And thanks to new Joint and Several Liability (JSL) legislation, the chances of workers being left with debts for unpaid tax and NI are much reduced. Nevertheless, contractors should help themselves by routinely checking the details of their payment arrangements and, if necessary, questioning how much they’re being paid and how that figure is arrived at. 

None of that is of much comfort to those who still owe life-changing sums of money thanks to schemes they believed to be legal and compliant. Many will fight on. The Loan Charge is a scandal that refuses to go away.