This post was originally published on this site.
HM Revenue and Customs has begun writing to thousands of people and employers with outstanding Loan Charge liabilities, inviting them to settle under a new scheme that it says could reduce their bills by up to £70,000.
The tax authority said most customers would see their bills reduced, with around a third able to settle without paying anything at all. Anyone who does not settle will have to pay the full amount of the Loan Charge.
The Loan Charge Settlement Scheme legislation came into force on 5 August 2026 and HMRC has started contacting customers to make settlement offers. The department is asking anyone who receives a letter from their caseworker to respond as soon as possible, and said every customer has a named contact they or their agent can speak to, because the arrangements can be complicated and take time to work through.
Under the scheme, bills could be reduced by up to £10,000 for each year a customer used an avoidance arrangement. HMRC will also remove late payment interest and apply a £5,000 reduction to every customer’s bill. The department says that, overall, most people could see reductions of at least 50 per cent in what they have to pay.
Customers who cannot pay in full straight away will be able to agree a payment arrangement based on what they can afford. Anyone who settles under the new terms can choose to pay over five years, with longer arrangements available depending on their circumstances.
“Get in touch so we can help you resolve this”
Jonathan Smith, Director of Counter Avoidance at HMRC, said: “We want to help people draw a line under their loan charge liability and reach a resolution, but that can only happen if you talk to us.
“Some people will see their bills reduced to zero and that is why we need them to engage with us. Our message is simple: get in touch so we can help you resolve this.
“You don’t have to wait for your letter from us, you can contact your named caseworker at any time to discuss the settlement opportunity.”
HMRC said 90 days is the minimum period the loan charge legislation allows for acceptance of a settlement offer, and that for the majority of customers it will allow a longer period.
The scheme follows the Independent Loan Charge Review, led by Ray McCann, a former president of the Chartered Institute of Taxation, which was published alongside the Budget in November 2025. The government accepted all but one of its recommendations, including a settlement opportunity calculated at the tax rates in force when the loans were originally made, a flat £5,000 reduction per individual, the write-off of late payment interest and a cap on reductions of £70,000 per person.
The Loan Charge has been a long-running source of dispute between HMRC and contractors, with MPs having previously drawn parallels with the Post Office Horizon scandal in criticising the department’s enforcement of the charge.
“Cherry-picking the best-case scenarios”
Contractor bodies gave the announcement a cool reception. Dave Chaplin, CEO and founder of contracting authority ContractorCalculator, said: “HMRC is cherry-picking the best-case scenarios from a wide range of potential impacts. The stark reality is that for many of the 50,000 victims pushed into these schemes as a condition of accepting work, they still cannot afford to pay.
“HMRC is acting like a dodgy shop billboard claiming up to 100% off, when just a tiny number of items are heavily discounted, which fit a tiny proportion of shoppers.
“The Loan Charge was always ill-conceived, and designed to spare the blushes of HMRC, who failed to enforce the law for years, despite sitting on the information that would have enabled them to do so. Instead of catching the robbers, they blamed the people being robbed.”
Crawford Temple, CEO of Professional Passport, an independent assessor of payment intermediary compliance, said the latest call to settle “feels like too little, too late, and risks adding another layer of unfairness for those who have already paid”.
“HMRC’s aggressive approach to the Loan Charge has, for too long, been directed at the wrong people,” he said. “Individuals and families have seen their lives, livelihoods and financial security badly damaged, while the architects and promoters of these schemes appear to have escaped with comparatively little consequence.”
A warning for businesses using contractors
Temple said the episode should serve as a warning to businesses that engage contract labour, arguing that the underlying problem has not gone away. HMRC has run previous settlement pushes for contractors caught by the charge.
“That should be a warning to our sector. Disguised remuneration schemes have not disappeared; they continue to operate and create significant risks for workers, agencies and businesses. The damage is still being done, while enforcement often appears to come after the event,” he said.
“HMRC needs to get ahead of the problem, disrupt the promoters and schemes at source, and protect workers before they become caught up in another costly tax dispute. Simply chasing the casualties of these schemes is not an effective enforcement strategy.”
HMRC has published a video explaining how the settlement scheme works and said customers with an unresolved liability can contact their named caseworker at any time to discuss it.
