HMRC Loan Charge Review 2026: Tax Disputes and Settlement Guidance

The loan charge is an anti-avoidance measure introduced by the government in Finance Act 2016. It was intended to address the tax loss from disguised remuneration schemes, arising when individuals would structure their payments in such a way that meant their income mostly escaped income tax and NICs.

Scheme promoters would encourage individuals who were contracting their services out to take part in these schemes, promising that the arrangements were robust and would result in a higher take-home pay. In some cases, individuals were forced to take part in these schemes in order to secure the contracts of work.

Very broadly, these schemes would be structured such that the individual’s clients made payments not to the individual, but to an umbrella company, who would employ the individual and pay the individual a nominal wage. The remainder of the cash ends up in an offshore trust. The scheme promoters would take their fee, and what was left would be ‘loaned’ to the individual. Loan payments are not subject to tax, but as there was never any intent to repay the loan, the amounts were in essence income and should have been taxed accordingly.

The loan charge was introduced to try and capture the tax on ‘loan’ payments that previously escaped tax in the UK.

The terms of the loan charge were designed to be deliberately punitive, such that taxpayers would be encouraged to come forwards and settle before the loan charge legislation was enacted. However, many chose not to settle, partly due to scheme promoters aggressively continuing to maintain that the schemes worked and would stand up against HMRC scrutiny at Tribunal. However, tax avoidance schemes are nearly always defeated, and we write more about how Menzies support individuals caught up in tax avoidance arrangements.

The original terms of the loan charge were criticised for being too harsh. The rules dictated that all amounts paid as ‘loans’ from 1999 and not repaid by 5 April 2019, would be treated as an income receipt notionally as having been paid on 5 April 2019. This pushed individuals into higher tax brackets than they would normally have been, if they’d paid income tax on an annual basis. In a lot of cases, the individuals involved simply didn’t have the funds available to face the tax charges.

It was also deemed to be unfair in that it was retroactive in its nature and looked back 20 years. This was seen to override HMRC’s usual administrative powers in relation to how far back they can assess.

Scheme promoters have been accused of not sufficiently outlining the risks involved of engaging in loan schemes, which is contrary to the ‘Professional Conduct in Relation to Taxation’ guidance that all reputable tax advisers adhere to. Whilst not strictly illegal, the schemes were contrived avoidance schemes that were always very likely to be robustly challenged by HMRC. Some promoters would also use DOTAS numbers to suggest to individuals that this reference number meant HMRC had given some sort of approval, which was never correct. It’s therefore likely that scheme users would not have been aware of the risks, and instead thought these schemes would give them more certainty over their tax affairs, which unfortunately wasn’t true.

According to the Loan Charge Action Group, a non-profit pressure group, at least 10 individuals facing the loan charge have committed suicide, with reports of other cases of attempted suicide, serious harm, bankruptcy and financial hardship, and family breakdowns. The negative impact of this legislation cannot be overstated.

Sir Amyas Morse undertook the first major review of the loan charge legislation in 2019. The main changes made as a consequence of the Morse review were that the lookback period was limited, and only loans from December 2010 onwards would be captured. Additionally, years would fall away if an individual had made sufficient disclosure in their tax returns and HMRC had failed to act on that information in time.

Despite the changes made following the Morse review, it was estimated in 2025 that there were some 32,000 taxpayers who remain impacted by the loan charge and are yet to settle with HMRC. It was clear that further intervention was required in order to encourage taxpayers to come forwards, and a second major independent review was commissioned in 2025 and undertaken by Ray McCann.

Alongside the autumn budget 2025 the findings of the McCann review and the government’s response to those findings were published. It was announced that a new and final loan charge settlement opportunity would be introduced in Spring 2026. The review recommended more favourable terms for settlement, which the government accepted and, in some cases, went further. The intent here is that the new settlement opportunity will be a final chance for those 32,000 individuals to come forwards and finally settle their liabilities.

Our upcoming blog details the terms available based on the draft legislation. We envisage the settlement opportunity to open in 2026, and HMRC have already begun to contact affected taxpayers.