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Brown UK HMRC tax envelope

Loan charge: HMRC has no data on ‘unwitting’ scheme users


HMRC doesn’t know how many people entered disguised remuneration schemes ‘unwittingly’, but according to the tax department’s chief executive, their motives are not relevant to determining whether tax is due.

19th Mar 2024
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Jim Harra, the chief executive and permanent secretary of HMRC, has revealed in a letter about the loan charge to Harriett Baldwin MP, the chair of the Treasury Select Committee, that HMRC does not know how many taxpayers got involved in their disguised remuneration (DR) tax avoidance schemes “unwittingly”. 

The 17-page letter covers the scale and demographics of those caught by the scheme, the current progress on settling loan charge debts, the 2019 Morse Review and loan charge “myths”. He also hit back on claims that HMRC has been “heavy-handed” in cracking down on those facing the loan charge.  

No estimate on the ‘unwitting’ scheme users

While the letter contained a lot of data, the one figure Harra wasn’t able to pin down was the number of people who joined a disguised remuneration scheme under false promises by a promoter. Harra said HMRC did not have any estimates on the number of people who “unwittingly” entered a scheme. 

He said that as set out in the Morse Review it’s difficult to ascertain how many of those affected by the loan charge were “induced” into schemes or followed recommendations from what they might have regarded as reliable third parties. 

However, Harra didn’t back down to arguments about the taxpayer’s motivations and the loan charge. “It is difficult to determine the level of understanding or motives of an individual DR scheme user, and this is usually not relevant to determining whether tax is due.”

The numbers Harra was able to share were that 40,000 individuals and 5,000 employers affected by the loan charge have still not settled with HMRC. These numbers also include those who have settled some but not all of their liabilities. 

Harra was not able to share exactly how much these taxpayers owe, although he said the median settlement is £19,000 for individuals and £205,000 for employers. This total covers taxes, interest and penalties. 

Meanwhile, Harra revealed that approximately 1,200 taxpayers are discussing settlement with HMRC under the 2020 terms. To reach the point of a settlement requires multiple stages of correspondence, sharing information and agreeing calculations, he said. 

“So the length of time over which settlement discussions take place does not indicate delays by HMRC. Some settlements, particularly those involving both employers and employees, can require complex and interacting calculations, which we work through with taxpayers.” 


Harra was also asked by the Treasury Select Committee for information on the demographics of those affected. He revealed that when taking into account the disguised remuneration loan they received, the users of the schemes have on average twice as much income as the average UK taxpayer, and 70% of users have used a scheme for two years or more.

“The tax bills for people who have repeatedly used schemes will generally be higher than those who have used them once,” he said. 

As for a breakdown of the sectors most under scrutiny, two-thirds of those affected by the loan charge work in business services, including IT consultants, financial advisers and management consultants. Harra said that fewer than 3% are thought to have worked in medical services (such as doctors and nurses) or teaching, while fewer than 2% worked in the social and community services sector. 

Meanwhile, the area most prevalent for use of the avoidance scheme was in London and the South East. 

Settling debt

Quizzed on the current progress on settling debts related to the loan charge, Harra said that arrangements will be based on what the taxpayer can afford and that there’s no limit to how long the Revenue can spread the payments. However, he noted that HMRC does not expect anyone to pay more than half their disposable income after living expenses up to £3,000 per month.  

He qualified that the expenditure deducted in calculating disposable income includes household bills, and other reasonable expenses, for example, gym membership, healthcare plans and private school fees.

Currently no individuals subjected to the loan charge have been prosecuted for the promotion or operation of a disguised remuneration scheme. However, a number of individuals are under criminal investigation by HMRC for offences linked to the loan charge.  

HMRC under scrutiny

Harra signed off the letter by saying that in the nearly eight years since the loan charge was announced HMRC’s approach has been subjected to “frequent scrutiny” through various committees, reviews and judicial review challenges. He noted that HMRC has “successfully defended each one”.  

HMRC has previously confirmed the suicides of 10 people facing the loan charge, while those facing large tax bills have criticised the tax department’s tax crackdown and that it operates without oversight. 

Towards the end of the letter, Harra acknowledged that undergoing an HMRC investigation can be “stressful” but that HMRC aims “to treat everyone sympathetically”. 

“We do not accept claims that we have been deliberately heavy-handed. We certainly do not intentionally write to taxpayers on specific days, such as their birthday, to increase the impact of our interventions. We do not play with people’s emotions. We recognise that there is a human story behind each one of these cases and we take our charter responsibilities very seriously.”

He concluded: “HMRC must do what it can to collect the tax that is due to ensure fairness for all other taxpayers.” 

Replies (13)

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19th Mar 2024 09:30

HMRC sent me a letter dated 14February2024, requesting £259k in 14 days - so maybe not a birthday but it’s a valentines envelope no-one wants to receive!

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By Ruddles
19th Mar 2024 09:35


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Replying to Ruddles:
By Justin Bryant
19th Mar 2024 09:55

Well, unlike you and like several eminent tax barristers and other tax lawyers (who actually understand all this properly for what it is) I am not ashamed at all in calling out this scandal (as I have done from the very beginning and I have been proved right all along). I note JH/HMRC has so far not "successfully defended" this list of shameful HMRC misconduct and duplicity:

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Replying to Ruddles:
By ireallyshouldknowthisbut
19th Mar 2024 14:56

Ruddles wrote:


You do make me laugh.

It was always the bigger boys what made 'em do it.

Lack lustrre and shoddy enforcement from HMRC (ie what they do best) does not retrospectively make trying to dodge your taxes with this contrived scheme right.

Thanks (5)
Replying to ireallyshouldknowthisbut:
the sea otter
By memyself-eye
19th Mar 2024 18:30

Agree 100% - cos you can't get more than 100%!

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John Toon
By John Toon
19th Mar 2024 11:32

How the hell are HMRC supposed to determine how many entered these schemes unsuspectingly. The default approach would be 100% and that certainly applies to anyone restrospectively being asked to consider their actions. But what about the greedy people who were presented with some information who chose to go ahead anyway?

I'm not suggesting there isn't a scandal here or that some people weren't duped by promoters but I think this kind of retrospective review, after the fact, is very dangerous. What needs to happen to avoid something like this happening again is the kind of things that others, better placed than I, have suggested such as personal liability on scheme promotors etc.

Thanks (2)
Replying to johnt27:
By FactChecker
19th Mar 2024 15:05

... but better if liability started with the employer (attached severally to the directors personally).
Then, if brave/stupid enough to proceed, they (unlike employees) are in a position to:
a) take out insurance against the scheme failing; and
b) ensure they have a contract with promoter that is more equitably balanced.

Might help to focus minds a bit ...

Thanks (4)
Replying to johnt27:
paddle steamer
19th Mar 2024 17:14


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By cliveth
20th Mar 2024 09:50

Jim Harra and HMRC should be ashamed of themselves. He has completely ignored the shameful conduct of HMRC in a large number of cases. I am dealing with several cases where HMRC, realising that it would be out of time if it did not issue Regulation 80 Determinations/Section 8 Decisions appears to have adopted a blanket scattergun approach issuing assessments to as many individuals/companies that it could before 5 April 2023. In most cases there was already a settlement agreement abd tax paid. 15 months on we are still waiting responses from HMRC. Disgraceful waste of public resources.

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Donald MacKenzie
By Donald MacKenzie
20th Mar 2024 09:52

After being caught, it appears to be human nature to deny that you were aware of what you were doing or perhaps unaware it was wrong.

Arranging your affairs so as to minimize tax is not illegal. It is when you add contrived steps and try to disguise income as something else that you overstep the mark. The promoters and enablers of the bigger and dafter schemes should be in jail.

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By Herd
20th Mar 2024 10:15

I think in fairness to us honest tax payers that HMRC should continue to pursue people who tried to avoid tax by using one of the schemes. If the tax payer received bad advice then they may have claim against the advisor. It is beyond me how anyone with any sense could think they were anything other than Tax avoidance. What I would be interested to know is how many people ticked the box on their Tax Return saying they had taken advantage of one of the schemes. Don't say most people did not understand the question. If HMRC don't continue to pursue all individuals involved then they should make the payment of Tax voluntary for everyone.

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Jennifer Adams
By Jennifer Adams
20th Mar 2024 10:50

A client of mine was caught. English is not her 1st language and didnt really understand what was happening. She just wanted a job.

But when it was explained she wanted to pay and get it over with.

We found it difficult to get the info out of the provider so she made a payment on account.

When we obtained the correct figures we submitted and waited.

HMRC came back with just a figure of amount due with no explanation as to why she was being charged a high penalty. I wrote querying and at the same time asked for the overpayment to be returned.

That was 2 years ago. Despite phone calls and letters = nothing.

Oh sorry... on acknowledgement to a letter sent over 6 months ago.

I have joined the Loan Charge Action Group on Linked In.

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By JamesDS
20th Mar 2024 12:04

Could it be that they don't have the data because they didn't ask for it?

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