HMRC has spent an eye-watering £186 million on its crackdown on loan charge taxes, recouping just £44 million in return. The 'botched' operation by the Labour government's tax arm has been heavily criticised by politicians and campaigners alike.
Loan charge compliance costs
HMRC targeted 'disguised remuneration' schemes under the loan charge system, affecting around 50,000 people who used such arrangements. Following a scandal that saw UK taxpayers hit with exorbitant bills amounting to tens of thousands of pounds, HMRC agreed to a new settlement offer and pledged to work with those impacted.
It has now emerged that loan charge compliance has cost HMRC £31 million per year, totalling £186 million since it began in 2019. Settlements have been reached with 800 individuals, recovering only £44 million.
Political backlash
Sir Jacob Rees-Mogg, a former Conservative cabinet minister, condemned the approach: 'Retrospective action is completely unconstitutional. HMRC didn’t have any objections at the time, and it’s extremely unfair that it’s now deemed that the schemes are not allowed. Innocent taxpayers killed themselves because of a disgraceful and unfair administration of tax, when they thought they’d done something perfectly legitimate. HMRC should have gone after the promoters of the schemes if they thought they were wrong.'
Greg Smith, MP for Mid Buckinghamshire, added: 'All along, HMRC has been targeting the wrong people and yet even now, the Labour Government is still only pursuing people that are victims of mis-selling, while doing nothing to recover the millions made by those who mis-sold these schemes, which is shameful.'
Campaigner criticism
Steve Packham, co-founder of the Loan Charge Action Group, said: 'In opposition, Rachel Reeves said HMRC should go after the perpetrators, yet in government has done a complete U-turn. Whilst those who mis-sold PPI are being forced to pay back millions, those who mis-sold contractor loan schemes are not being asked to pay a single penny – it’s double standards.'
HMRC response
An HMRC spokesman said: 'Following the 2025 Loan Charge Review, the Government agreed a new settlement offer, and we are working with our customers to help bring this matter to a close.'
