Will the McCann Loan Charge Review step outside itself to defy the biased, half-baked, narrow exercise Labour wants?

The history of the loan charge scandal has so far been a twisting and turning one.

We’ve had a background of disinformation and cover-up from HMRC and other officials.

There’s been a constant stream of revelations thanks to Freedom of Information requests, MPs, and the media.

Yet affected contractors and other taxpayers have received cynical government responses, none of which have properly addressed, never mind resolved, the whole loan charge scandal, writes Conservative MP Greg Smith, co-chair of the Loan Charge and Taxpayer Fairness APPG, exclusively for ContractorUK.

Loan Charge in 2025; how did we get here?

The controversial loan charge legislation was conceived (rather troublingly) within HMRC, the UK’s tax authority. So not by elected politicians or Treasury civil servants briefed by democratically selected ministers.

The loan charge came into force in April 2019 and yet nearly six years later, my understanding is that HMRC has not revised its figure of some 40,000 unresolved cases.

A profound disaster in both human and policy terms

Aside from the human cost of HMRC’s whole approach to the loan charge -- 10 confirmed suicides; 13 attempted suicides, 11 other cases of serious self-harm, countless divorces, family breakdowns, hardship, bankruptcies and homelessness -- as an exercise in policy-making and public administration, the ‘LC’ has been a profound disaster. 

We are now over a month into the latest government response to the loan charge.

It’s a limited review of settlement terms, led by a former HMRC inspector and ex-Chartered Institute Of Taxation president, Ray McCann.  

Despite this Labour government-commissioned ‘review of the loan charge’ having been announced on January 23rd, there has not yet been a call for evidence, which is extraordinary.

Labour’s loan charge review terms are putting families on edge, and in the dark

The Loan Charge and Taxpayer Fairness APPG (of which I am co-chair) has had communications from understandably anxious individuals, already reeling at the biased, restrictive “Terms of Reference” of the review. At the time of writing, these individuals are in the dark about what sort of evidence they should submit and in what format.

At the same time as being very tightly restricted, the review announcement was also half-baked.

Why? Well, a call for evidence should have been properly planned and launched at the start, instead of wasting over a month of what is a limited time for (a small part of) this scandal to be looked at again.

The McCann review call for evidence on the loan charge is almost here

Our APPG is pleased to have now heard that there will be a proper call for evidence for contractors and other affected parties to contribute to the McCann review -- and we hope to see this launched as soon as possible.

It is still, though, a failure on the part of the Treasury’s Exchequer Secretary James Murray (and his team), not to have planned this evidence-call properly, considering that at the same time they so tightly restricted the review, they imposed a strict timetable on Mr McCann to report “by summer 2025.” 

The APPG is and will engage fully with the McCann loan charge review.

Labour Loan Charge Review: what is and isn’t’ in scope

But it is necessary to be clear and honest about what this Labour government-commissioned review into this HMRC policy will and won’t look at. 

Our APPG wrote to Chancellor Rachel Reeves in December 2024 calling for a proper review of the loan charge – or ideally, an actual independent inquiry, to consider the whole issue and scandal.

In our letter to HM Treasury’s boss, we quoted Jason Beer KC, a leading authority on government inquiries.

Three key questions public inquiries must ask

Beer has stated that their main function ought to be to address three key questions[1]:

1. What happened?

2. Why did it happen and who is to blame?

3. What can be done to prevent this happening again?

The McCann review into settlement terms doesn’t address any of these three questions.

It ducks asking what happened and why it happened -- it deliberately, and in my view cynically, ignores the history of the whole fiasco.

What Labour’s loan charge review ignores (cont.)

The review ignores asking ‘Who is to blame?’ because its highly restricted “Terms of Reference” make clear that individuals are liable and that they must pay the “tax due” -- even though part of the whole scandal is that this has never been proven in court (and that HMRC admitted that it conceived of the loan charge precisely to avoid the need to go to court[2]).

By deliberately, and as I say cynically too, avoiding these basic, fundamental first two questions, it’s not possible for the very restricted McCann review to address the third one. And this last question is key -- ‘What can be done to prevent such a scandal from happening again?’

Remember, McCann isn’t just ex-CIOT, he’s also ex-Revenue

It also is important to put on record here my understanding that Ray McCann has been involved in dealing with schemes for years, both while working for the Revenue and also in the private sector, when he worked as a tax director for PricewaterhouseCoopers.

Mr McCann was involved in HMRC's anti-avoidance policy and compliance strategy -- the very areas of the tax office that were involved with the loan charge. He worked at the tax office for three decades. And at ‘PwC’ (as the firm is known today), Mr McCann’s very first client was a company that had operated two large Employer Benefit Trust schemes.   

There is no criticism of Ray McCann in this -- he is clearly a very professional and capable person and I, plus my APPG colleagues, don’t doubt he will do his best within the confines of this restricted ‘loan charge review.’ A review that is increasingly and correctly being acknowledged as a review of settlement terms.

Not a definition of 'independent' that I recognise

But my concern is that Mr McCann’s background makes him inappropriate for a genuinely independent inquiry into this HMRC policy. Rather than this being an independent review, it is a review being conducted by an external, former HMRC inspector with a direct history of involvement in this area.

In our December letter to the chancellor, we also said, with reference to the previous Morse Review of the loan charge:

“The 2019 review was not a proper review of the whole issue nor was it independent. This government must not repeat the same mistake as the last one – by deliberately and cynically commissioning a partial and biased review.  

And we said:

“We urge this government not to make the same mistake by allowing this to be another orchestrated, restricted and incomplete review”.

Yet this is exactly what this government has done.

What the Treasury Exchequer Secretary should have said...

If James Murray had not committed to a “truly independent review” then it would have been legitimate to announce, something akin to:

“We are not reviewing the loan charge, nor conducting a full independent inquiry into it, however we are commissioning a former HMRC inspector to review settlement terms to see how people can be encouraged to settle”.

Passing off

However, by trying to pass off this review of settlement terms as something it is so clearly not -- an independent review of the loan charge -- Mr Murray and this government have joined the legion of those in HMRC and the Treasury who have been responsible for evading proper scrutiny and avoiding the full facts, to avoid proper accountability.

One of the disturbing things about the loan charge scandal has been the way that HMRC and the Treasury have ignored evidence about the whole issue; its genesis, its history, the reality of legal cases, and the loan charge legislation.

Speaking volumes

They’ve ignored the reality of the impact on individuals and the reality of how HMRC has treated and is treating those affected, which has consistently been at odds with the carefully constructed ‘agreed lines’ given to MPs, parliamentary committees and journalists.

The McCann loan charge review allows them to continue to ignore this. It is also notable that this is the second Treasury-commissioned review that has deliberately excluded looking at the issues above, including the role, conduct and communications of HMRC and the Treasury. To me, that speaks volumes.

‘Encouraging people to pay’

Exchequer Secretary James Murray will no doubt claim that what he and the Treasury are trying to do, simply, is to resolve the issue. But what he means is actually just to resolve the outstanding cases -- ‘encouraging people to pay’ -- not to look at the injustice, nor who is at fault, and how a party is at fault. This latter question is key to getting to the bottom of the third rung of any strong public inquiry into a scandal -- how reoccurrence can be avoided.

In any case, the McCann review into settlement terms will not be the end of the matter. This review will not and cannot resolve the issue, as it has excluded thousands of cases that don’t fit the criteria.

A review designed by Labour not to look in key places at the key issues

I believe that Labour’s ‘review’ of the loan charge has been deliberately designed not only not to look at the fairness and legitimacy of the legislation (or its demonstrable failure), but also to not look at the wider loan charge scandal.

The result? Contractors and other individuals with pre-2010 cases that were taken out of the remit of the loan charge by the previous Morse Review, but still facing HMRC action, are not included. Nor are all the public sector workers mis-sold freelance work contracts after the ill-considered roll-out of the off-payroll working rules to the public sector. 

Will McCann dare to make huge adjustments?

MPs will continue to have such cases to deal with and so the issue will not go away.

Even without that, unless Ray McCann is permitted to make huge adjustments to settlement terms and amounts -- and the “Terms of Reference” suggest he will have a fight on his hands with the government if he dares  -- many people will still not be able to ‘settle.’ And more futile human misery will ensue, in the shape of HMRC chasing money people simply do not have.  

Our continued push

The Loan Charge and Taxpayer Fairness APPG is also not going to go away.

We will continue to push for a proper independent inquiry into the loan charge scandal, and ‘proper’ equates to the three-fold focus and questions recommended by Jason Beer KC.

Ultimately, there can be no healing and resolution without full transparency and proper accountability. Yet not for the first time, HMRC and the Treasury have engineered a cynically restricted, insufficiently independent review of the loan charge to avoid those pre-requisites -- and avoid those at all costs. Like all government-facilitated scandals and grave injustices, in the end, the truth will come out and justice will follow.

[1] https://www.instituteforgovernment.org.uk/explainer/public-inquiries

[2] https://www.loanchargeappg.co.uk/wp-content/uploads/2019/05/Loan-Charge-Inquiry-Report-April-2019-FINAL.pdf#page=35