The government has launched its promised independent review into the loan charge but has been met with criticism from campaigners who dismissed it as a “sham”.
The loan charge was implemented to close a tax loophole and recover backdated taxes but has left many freelance workers facing large bills.
In a statement on Thursday, Treasury Minister James Murray said the review would look at barriers preventing those owing money from “reaching resolution with HMRC and to recommend ways in which they can be encouraged to do so”.
However, it will not reconsider the government’s position that the loan charge is fair.
This has led the Loan Charge Action Group to dismiss the review as a “sham” and a “complete betrayal”.
“What the government has announced today is not a review at all, as it actually astonishingly excludes reviewing the loan charge,” said group founder Steve Packham.
He said the review failed to look at how HMRC set up the loan charge and who operated and promoted the tax avoidance schemes.
In 1999, the then-Labour government introduced IR 35, a tax law which sought to class many self-employed freelance workers as employers, meaning they would have to pay National Insurance.
Thousands subsequently signed up to schemes, promoted by lawyers and accountants, allowing them to legally avoid paying National Insurance.
This usually involved the freelancers paying money to offshore companies, who loaned it back to them without expecting the loan to be repaid.
After the government shut this loophole, the Treasury used the loan charge to ask the freelancers to pay backdated tax.
HMRC estimates around 50,000 people are affected by the loan charge.
Announcing a review of the loan charge, Treasury Minister James Murray said: “The government believes that it is right that those who did not pay the right amount of income tax and National Insurance are required to resolve their affairs with HMRC.
“Accepting otherwise would be contrary to the decisions of the courts and would be unfair to the vast majority of taxpayers who have never used these schemes.”
However, he added that there was concern about the charge, particularly the size of some payments and whether people were able to pay “in a reasonable timeframe”.
He said the review would aim “to bring the matter to a close or those affected; ensure fairness for all taxpayers; and ensure that appropriate support is in place for those subject to the loan charge”.
It will be conducted by Ray McCann, a former President of the Chartered Institute of Taxation, who is expected to report back by the summer.
Conservative MP Greg Smith, and co-chair of the Loan Charge All Party Parliamentary Group (APPG), said the announcement of the review was “a farce”.
“This is not the review that was promised nor the review that is so desperately needed and the APPG will continue to push for a genuine inquiry into this scandal,” he said.
