Latest news with #loancharge
Sky News
7 days ago
- Business
- Sky News
Accountants were paid to place clients into loan charge schemes targeted by HMRC
Victims of the loan charge received advice from professional accountants who were being paid to place them into tax avoidance schemes. Sky News has seen evidence of chartered accountants advising their clients to enter loan arrangements, run by companies that were paying them a commission. These schemes were later targeted by HMRC, and workers were hit with giant tax bills, sometimes hundreds of thousands of pounds. In some cases, the tax demands have been crippling. It's a campaign that has driven people to the brink of bankruptcy, devastated families and has been linked to 10 suicides. MPs are now calling for a public investigation into the role of accountants and other professional bodies in the proliferation of these schemes. An independent review of the loan charge is currently under way, but it is limited in its scope. What is the loan charge scandal? It is the latest revelation in a scandal that has caused untold misery for tens of thousands of people, who were enrolled into tax avoidance schemes, often against their knowledge. They included contractors who were urged to avoid setting up limited companies and to instead receive payment through the schemes, which were meant to handle their pay and taxes. 1:42 They worked by paying workers what were technically loans, instead of a salary. This allowed them to circumvent paying income tax. What many assumed were tax deductions on their payslips were, in fact, fees going towards the promoters of the schemes. Tax avoidance is not illegal, but HMRC has successfully challenged tax avoidance schemes in the courts, and workers have subsequently been asked to pay the missing tax. There is no suggestion that these accountants broke the law. Richard's story For Richard Clancey, HMRC's handling of the loan charge feels like "state-sponsored bullying". After being offered a contract role in 2010, Mr Clancey, now a retired computer services professional, contacted a chartered accountant in Kent to help him set up a limited company. The accountant encouraged him to enrol in a payment scheme instead. "He gave us an hour's presentation on the benefits of the scheme and how it worked," Mr Clancey said. "This included how they would handle all administration, pay all tax that was due, was IR35 and tax law compliant, had a lower risk than using a limited company, had been approved by a tax QC and was currently used by several people who were working for HMRC. "The presentation was very elaborate and complicated and I cannot claim that I understood it all, but I wanted to ensure I was legal and compliant, so I trusted the advice of a chartered accountant that use of this scheme was the right thing to do." The accountant told him that he was receiving an introductory fee, but not that he would receive ongoing payment. In 2014, Mr Clancey received an email from his accountant outlining that the previous year he had received £257 in commission. However, he did not receive statements for the previous two years. "Although you were notified of this commission before, we are also required to declare the amount of commission to you according to the guidance of the Institute of Chartered Accountants of England and Wales," the email read. "This commission has not cost you anything," it added. The company's former website page clearly stated that it offered accountants commission, boasting that the rates had been raised. At this point, Mr Clancey was already on the radar of HMRC. In 2012, tax authorities wrote to him to explain that he had been in a tax avoidance scheme that "HMRC believes does not work". He was subsequently asked to pay more than £100,000. "Over the next seven years, I received multiple penalties and threats from HMRC who said I had been a tax avoider who should settle their debts now or face worse consequences later," he said. "There hasn't been a single day when I haven't been consumed by the frustration and anger of my situation and how it arose... Since my involvement with [the scheme] and the subsequent hounding from HMRC and government, a lot of that has changed. This state-sponsored bullying has caused me to suffer some mental health issues. "My personal stress levels were through the roof. I dreaded the next brown envelope coming through the post box with outrageous, unsubstantiated demands. My poor wife would apologise and burst into tears as she brought these to me." HMRC said it takes the wellbeing of all taxpayers seriously. "We are committed to identifying and supporting customers who need extra help with their tax affairs and have made significant improvements to this service over the last few years." Like others in his position, Mr Clancey is frustrated by the blunt approach of the tax authority and the lack of accountability from other parties. "I have been increasingly concerned that my chartered accountant led me into the hands of a scam organisation," he said. "HMRC continues to persecute victims." Government reaction The government has now launched an independent review into the loan charge, and HMRC is pausing its activity until that review is complete - but its focus is on helping people to reach a settlement. The review will not look at the historical role of accountants, promoters and recruitment agencies, even though they propped up the schemes. Politicians and campaigners have called for a broader investigation. Greg Smith, MP and co-chair of the Loan Charge and Taxpayer Fairness APPG, said: "It's clear that many chartered accountants were directly involved in the promotion of loan schemes. "People trusted accountants and had the right to rely on this advice, and yet, instead, are facing life-ruining bills. There needs to be a proper investigation into this as part of an independent inquiry into the loan charge scandal," he said. "Either HMRC warned accountants not to recommend these schemes, in which case the accountants were giving reckless and potentially fraudulent advice; or HMRC didn't tell accountants not to do this, in which case HMRC themselves were seriously at fault. "Either way, it is quite wrong that the current government continues to only pursue those who took and followed professional advice and not those who gave it, whilst profiting from doing so." The experience has damaged Mr Clancey's faith in the sector. "I will never again trust professional financial advice," he said. "If the advice of a chartered accountant can cause this much damage without culpability, then there is something very wrong. It is a failure on the part of the entire tax industry that accredited professionals can, through their advice, destroy the lives of the individuals that they advise." A spokesperson for the Institute of Chartered Accountants in England and Wales, an industry body, said: "We expect chartered accountants to adhere to the highest standards in all of their work, including tax. "Robust rules for members performing tax work are contained in standards which have been developed and strengthened to prevent the involvement of members in aggressive tax avoidance." The organisation strengthened its standards in 2017, after the loan charge legislation was announced, adding that "members must not create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of parliament in enacting relevant legislation and/or are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation".
Telegraph
05-07-2025
- Business
- Telegraph
HMRC accused of cutting secret loan charge deal with large companies
The tax office gave secret 85pc discounts to large companies involved in the loan charge scandal, documents s. A Freedom of Information request has suggested that HM Revenue and Customs (HMRC) reached generous settlement deals with multi-million pound companies who used payroll loan schemes. Meanwhile, independent contractors were hit with life-changing bills. The agreements came to light after a campaigner submitted a Freedom of Information request which was then revealed in Parliament by Conservative MP, Greg Smith, during Treasury Questions on Tuesday. HMRC said it does not recognise the claims. MPs said the revelation was 'staggering'. Sarah Olney, Liberal Democrat MP for Richmond Park, said: 'It is unacceptable that victims have been consistently refused the justice they deserve while large companies received settlements a decade ago. 'This information shows the need for a proper, independent inquiry that looks at the whole loan charge scandal.' The loan charge is a controversial law that left 50,000 self-employed workers with crippling tax bills and has been linked to 10 suicides. It was introduced in 2017 to target contractors who were paid through non-taxable loans rather than salaries. The loan schemes date back to the 1990s, and were often marketed as HMRC-compliant by respected tax advisers. But HMRC maintains that it never approved the schemes. It used the loan charge to claw back the unpaid tax from the workers, with many facing bills that exceeded their income. MPs and campaigners have accused HMRC of unfairly targeting and ruthlessly hounding the contractors while failing to go after the scheme promoters. Now, minutes of a meeting from 2019 between Lord Amyas Morse, who led the 2019 loan charge review, and the leader of the latest review, Ray McCann, reveal that HMRC offered discounts to settle the tax bills of employers who used the schemes. In the minutes of the meeting, Mr McCann is recorded as saying: 'The earlier settlement opportunity that had been open to large companies had included significant discounts, so that eventually the companies settled for somewhere in the region of 15pc in 2015.' He went on to say 'the contractors weren't offered these terms', and 'settlement opportunities have always had a discount, and contractor one is the only one that didn't.' Mr McCann is currently concluding the loan charge review, which was launched in January 2025 after calls from MPs. A former HMRC inspector, he was president of a professional body of tax advisers called the Chartered Institute of Taxation from 2018 to 2019. According to official figures, 800 companies paid HMRC £1bn through financial settlements related to the schemes between 2011 and 2015. This works out an average tax liability of £1.25m per firm. In Parliament earlier this week, Mr Smith said: 'A recent Freedom of Information request has revealed that, for a number of schemes, HMRC has settled with large corporations for just 15pc of what was owed. 'With the loan charge review ongoing, does the Chancellor agree with me that individuals should be treated no differently from the large corporations for which this precedent has been set?' Liberal Democrat MP Angus Macdonald, another APPG member, has tabled an Early Day motion – supported by 18 MPs so far – expressing 'astonishment' about the deals and the fact they have 'never been revealed to Parliament'. Mike Warburton, The Telegraph's tax columnist and former director at accountants Grant Thornton, said: 'These revelations have shown in stark contrast the way the Treasury and HMRC have treated large corporate taxpayers on the one hand and small contractors on the other.' Critics of the loan charge argue it retroactively punishes contractors who signed up to the schemes in good faith. The large timeframes involved create massive tax bills as years' worth of interest has rolled up on the debt. In one case, an individual earning £13,000 a year landed a £250,000 bill, according to the minutes of the meeting between Mr McCann and Lord Morse. Steve Packham, of the Loan Charge Action Group, said: 'Ten people have killed themselves as a direct result of HMRC's ruthless persecution of people who the Chancellor herself has described as 'victims of mis-selling'. 'Yet we now know that just a year before the loan charge was introduced to Parliament, HMRC agreed a deal with large companies letting them pay just 15pc of what they said they owed.' MPs and campaigners are now demanding that the Government offer contractors the same 15pc terms given to large corporations and open an inquiry into the scandal. Mr Smith, co-chairman of the Loan and Taxpayer Fairness APPG, said: 'It's absolutely staggering to discover that just a year before the loan charge was introduced to Parliament, that HMRC agreed a deal allowing large companies to settle for just 15pc of what HMRC said they owed, for use of similar arrangements.' He continued: 'Regardless of what Ray McCann recommends in his report on settlement terms, all those facing the loan charge and those pushed to settle to avoid it must all be offered no more than 15pc as full and final settlement.' HMRC said all settlements are agreed after considering the individual facts of each case and made under our published settlement terms. A spokesman said: 'We don't recognise these claims. We're absolutely committed to ensuring every taxpayer, regardless of size, pays the tax that's legally due. 'Given an independent review is under way it would be inappropriate for us to comment further.'
