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Loan Charge Controversy Is a Financial Scandal, Tax Lawyer Says

Posted on Jan. 20, 2023

The U.K. government should stop framing the loan charge as a tax avoidance issue and see it as “a financial scandal that has all but destroyed trust” in the tax system, a tax lawyer said.

People need to realize that the ongoing controversy “is not ultimately about tax avoidance on the part of affected taxpayers,” Sarah Gabbai of McDermott Will & Emery told Tax Notes on January 19 after it emerged that a 10th death by suicide was linked to the loan charge. Gabbai is leading a call for “a fair resolution” of the issue that would involve a “disguised remuneration settlement opportunity.”

HM Revenue & Customs “has made ten referrals” to the Independent Office for Police Conduct (IOPC) “where a customer has sadly taken their life and had used a disguised remuneration scheme,” HMRC Chief Executive Jim Harra said in a January 6 letter to the House of Commons Treasury Committee, published by the committee on January 17.

The purpose of the letter was to set out further information requested by the committee at a hearing in November 2022.

“Where we learn that a customer has lost their life or suffered serious injury and there is any suggestion that this might be linked to contact with HMRC, the matter is reviewed by an internal governance team within HMRC that is separate from the case team, and relevant cases are referred to the IOPC,” Harra wrote. “Eight investigations have concluded and there was no evidence of misconduct by any HMRC officer. Two investigations are currently ongoing,” he said, adding that HMRC is “taking forward organizational learning” from the concluded investigations.

‘Call This Out’

“Even if the policy aim is to tackle perceived tax avoidance motives, the current approach is not the right answer. It is enormously inefficient and costly for HMRC to administer and does not ultimately help HMRC in terms of securing future revenues. Affected taxpayers’ families are paying far too great a price,” Gabbai told Tax Notes in an emailed statement.

“This deadlock between HMRC and affected taxpayers needs to be resolved urgently. Internal HMRC investigations won’t achieve anything. A change of policy direction is long overdue, and it needs to come from the government. I fail to understand how it can possibly be detrimental to a politician’s career to call this out and actually do something about it. My heart goes out to the victims of this unacceptable and unnecessary legislation, and their families,” Gabbai added.

“I have previously commented on the great distress caused by the loan charge rules,” Mike Warburton, formerly a director at Grant Thornton, wrote in The Daily Telegraph on January 19. “Parliament is sovereign, and the government has the power to change the law in the interests of treating taxpayers with fairness and humanity. This should now happen without delay.”

Sixty-four tax professionals have signed the settlement proposal promoted by Gabbai and first published in October 2022. They include Justine Riccomini, head of employment and devolved tax at the Institute of Chartered Accountants of Scotland; Ray McCann, past president of the Chartered Institute of Taxation; and barristers Keith Gordon, David Pett, Ximena Montes Manzano, and Michael Sherry of Temple Tax Chambers.

“We have continually warned of the suicide risk of this immoral law. It must be changed,” the Loan Charge & Taxpayer Fairness All-Party Parliamentary Group tweeted on January 18.

The group said in a December 20, 2022, release that more than 100 parliamentarians had signed an open letter urging Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt to “agree to seek a resolution to the whole issue.” A resolution is “in everyone’s interests, not only the tens of thousands of families stuck in the loan charge nightmare, but also HMRC and the government, for whom the loan charge has become a significant problem, as well as being a wholesale failure as a policy,” it argued.

“It’s clear that individuals were mis-sold these schemes and were given no warning of pursuit by HMRC, yet it is these individuals who are facing ruin, whilst those who mis-sold the schemes to them have faced no action at all,” said the group’s vice chair, Baroness Susan Kramer.


Harra told the committee in November 2022 that HMRC had named on its website “a significant number of promoters” and the schemes they were promoting. “On avoidance, what is still stubborn is a small number of promoters going after a high volume of mainly workers. Most of the marketed avoidance schemes we see now are in employment, trying to avoid employment taxes,” he said.

“Our strategy is to make life as difficult as we possibly can for those promoters and drive them out of the market. We have been given new powers in the last couple of years to accelerate our ability to do that, but also to reduce the demand for their services,” Harra added.

HMRC updated a list of “named tax avoidance schemes, promoters, enablers, and suppliers” on January 19.

Subject Areas / Tax Topics
Magazine Citation
Tax Notes Int'l, Jan. 23, 2023, p. 523
109 Tax Notes Int'l 523 (Jan. 23, 2023)
Institutional Authors
Tax Analysts
Tax Analysts Document Number
DOC 2023-1596
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