Victims of the loan charge received advice from professional accountants who were being paid to place them into tax avoidance schemes. 

Sky News has seen evidence of chartered accountants advising their clients to enter loan arrangements, run by companies that were paying them a commission.

These schemes were later targeted by HMRC, and workers were hit with giant tax bills, sometimes hundreds of thousands of pounds.

Money blog: Value of a million homes rose 50% since COVID

In some cases, the tax demands have been crippling. It’s a campaign that has driven people to the brink of bankruptcy, devastated families and has been linked to 10 suicides.

MPs are now calling for a public investigation into the role of accountants and other professional bodies in the proliferation of these schemes.

An independent review of the loan charge is currently under way, but it is limited in its scope.

What is the loan charge scandal?

It is the latest revelation in a scandal that has caused untold misery for tens of thousands of people, who were enrolled into tax avoidance schemes, often against their knowledge.

They included contractors who were urged to avoid setting up limited companies and to instead receive payment through the schemes, which were meant to handle their pay and taxes.

They worked by paying workers what were technically loans, instead of a salary. This allowed them to circumvent paying income tax. What many assumed were tax deductions on their payslips were, in fact, fees going towards the promoters of the schemes.

Tax avoidance is not illegal, but HMRC has successfully challenged tax avoidance schemes in the courts, and workers have subsequently been asked to pay the missing tax. There is no suggestion that these accountants broke the law.

Richard’s story

For Richard Clancey, HMRC’s handling of the loan charge feels like “state-sponsored bullying”.

After being offered a contract role in 2010, Mr Clancey, now a retired computer services professional, contacted a chartered accountant in Kent to help him set up a limited company.

The accountant encouraged him to enrol in a payment scheme instead.

“He gave us an hour’s presentation on the benefits of the scheme and how it worked,” Mr Clancey said.

“This included how they would handle all administration, pay all tax that was due, was IR35 and tax law compliant, had a lower risk than using a limited company, had been approved by a tax QC and was currently used by several people who were working for HMRC.

“The presentation was very elaborate and complicated and I cannot claim that I understood it all, but I wanted to ensure I was legal and compliant, so I trusted the advice of a chartered accountant that use of this scheme was the right thing to do.”

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The accountant told him that he was receiving an introductory fee, but not that he would receive ongoing payment.

In 2014, Mr Clancey received an email from his accountant outlining that the previous year he had received £257 in commission. However, he did not receive statements for the previous two years.

“Although you were notified of this commission before, we are also required to declare the amount of commission to you according to the guidance of the Institute of Chartered Accountants of England and Wales,” the email read.

“This commission has not cost you anything,” it added.

The company’s former website page clearly stated that it offered accountants commission, boasting that the rates had been raised.

At this point, Mr Clancey was already on the radar of HMRC.

In 2012, tax authorities wrote to him to explain that he had been in a tax avoidance scheme that “HMRC believes does not work”. He was subsequently asked to pay more than £100,000.

“Over the next seven years, I received multiple penalties and threats from HMRC who said I had been a tax avoider who should settle their debts now or face worse consequences later,” he said.

“There hasn’t been a single day when I haven’t been consumed by the frustration and anger of my situation and how it arose… Since my involvement with [the scheme] and the subsequent hounding from HMRC and government, a lot of that has changed. This state-sponsored bullying has caused me to suffer some mental health issues.

“My personal stress levels were through the roof. I dreaded the next brown envelope coming through the post box with outrageous, unsubstantiated demands. My poor wife would apologise and burst into tears as she brought these to me.”

HMRC said it takes the wellbeing of all taxpayers seriously. “We are committed to identifying and supporting customers who need extra help with their tax affairs and have made significant improvements to this service over the last few years.”

Like others in his position, Mr Clancey is frustrated by the blunt approach of the tax authority and the lack of accountability from other parties.

“I have been increasingly concerned that my chartered accountant led me into the hands of a scam organisation,” he said.

“HMRC continues to persecute victims.”

Government reaction

The government has now launched an independent review into the loan charge, and HMRC is pausing its activity until that review is complete – but its focus is on helping people to reach a settlement.

The review will not look at the historical role of accountants, promoters and recruitment agencies, even though they propped up the schemes.

Politicians and campaigners have called for a broader investigation.

Greg Smith, MP and co-chair of the Loan Charge and Taxpayer Fairness APPG, said: “It’s clear that many chartered accountants were directly involved in the promotion of loan schemes.

“People trusted accountants and had the right to rely on this advice, and yet, instead, are facing life-ruining bills. There needs to be a proper investigation into this as part of an independent inquiry into the loan charge scandal,” he said.

“Either HMRC warned accountants not to recommend these schemes, in which case the accountants were giving reckless and potentially fraudulent advice; or HMRC didn’t tell accountants not to do this, in which case HMRC themselves were seriously at fault.

“Either way, it is quite wrong that the current government continues to only pursue those who took and followed professional advice and not those who gave it, whilst profiting from doing so.”

The experience has damaged Mr Clancey’s faith in the sector. “I will never again trust professional financial advice,” he said.

“If the advice of a chartered accountant can cause this much damage without culpability, then there is something very wrong. It is a failure on the part of the entire tax industry that accredited professionals can, through their advice, destroy the lives of the individuals that they advise.”

A spokesperson for the Institute of Chartered Accountants in England and Wales, an industry body, said: “We expect chartered accountants to adhere to the highest standards in all of their work, including tax.

“Robust rules for members performing tax work are contained in standards which have been developed and strengthened to prevent the involvement of members in aggressive tax avoidance.”

The organisation strengthened its standards in 2017, after the loan charge legislation was announced, adding that “members must not create, encourage or promote tax planning arrangements or structures that set out to achieve results that are contrary to the clear intention of parliament in enacting relevant legislation and/or are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation”.

Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK.

In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.

Maria’s treatment by Greater Manchester Police (GMP) was so shocking the chief constable described it as “undefendable” and yet a year after a high-profile inquiry found she had been “unlawfully” arrested and strip-searched, Maria now has a criminal conviction for the crime the inquiry said she should never have been arrested for.

Warning: This story includes graphic descriptions of strip searches and references to domestic violence.

The Baird Inquiry – named after its lead Dame Vera Baird – into GMP, published a year ago, found that the force made numerous unlawful arrests and unlawful strip searches on vulnerable women. A year on, the review has led to major changes in police processes.

Strip searches for welfare purposes, where the person is deemed at risk of harming themselves, are banned, and the mayor’s office told Sky News only one woman was intimately strip-searched to look for a concealed item by GMP last year.

Women had previously told Sky News the practice was being used by police “as a power trip” or “for the police to get their kicks”.

However, several women who gave evidence to the Baird Inquiry have told Sky News they feel let down and are still fighting for accountability and to get their complaints through the bureaucracy of a painfully slow system.

The case of Maria (not her real name) perhaps best illustrates how despite an inquiry pointing out her “terrible treatment”, she continues to face the consequences of what the police did.

‘Treated like a piece of meat’

The story begins with an act of poor service. A victim of domestic violence, Maria went to the police to get keys off her arrested partner but was made to wait outside for five-and-a-half hours.

The Baird Inquiry said: “This domestic abuse victim, alone in a strange city, made 14 calls for police to help her.

“She was repeatedly told that someone would contact her, but nobody did. The pattern didn’t change, hour after hour, until eventually she rang, sobbing and angry.”

The police then arrested her for malicious communications, saying she’d sworn at staff on the phone.

Inside the police station, officers strip-searched her because they thought she was concealing a vape. Maria told Sky News she was “treated like a piece of meat”.

The Baird Inquiry says of the demeaning humiliation: “Maria describes being told to take all her clothes off and, when completely naked, to open the lips of her vagina so the police could see inside and to bend over and open her anal area similarly.”

After the inquiry found all this not only “terrible” but “unlawful”, Chief Constable Stephen Watson described the actions of his officers towards Maria as “an inexplicable and undefendable exercise of police power”.

He added: “We’ve done the wrong thing, in the wrong way and we’ve created harm where harm already existed.”

Despite all of this, the charges of malicious communication were not dropped. They hung over Maria since her arrest in May 2023. Then in March this year, magistrates convicted her of the offence, and she was fined.

Dame Vera’s report describes the arrest for malicious communications as “pointless”, “unlawful”, “not in the public interest” and questions whether the officer had taken “a dislike to Maria”. Yet, while Maria gained a criminal record, no officer has been disciplined over her treatment.

A GMP spokesperson said: “The court has tested the evidence for the matter that Maria was arrested for, and we note the outcome by the magistrate. We have a separate investigation into complaints made about the defendant’s arrest and her treatment whilst in police custody.”

The complaint was referred to the Independent Office for Police Conduct (IOPC) in August 2023 and Maria was told several months ago the report was completed, but she has not heard anything since.

‘There’s been no accountability’

Dame Vera’s report also catalogues the “unlawful” arrest and strip search of Dannika Stewart in October 2023 at the same police station. Dannika is still grinding through the police complaints service to get a formal acknowledgement of their failings.

She told Sky News: “Everyone involved in it is still in the same position. There’s been no accountability from the police. We’re still fighting the complaint system, we’re still trying to prove something which has already been proved by an independent inquiry.”

Asked if anyone had been disciplined, Chief Constable Watson told Sky News: “There are ongoing investigations into individual failings, but for the most part the Baird review talked about systemic failings of leadership, it talked of failings in policy and failings of systems.

“In some cases, those people who may have misconducted themselves at the level of professional standards have retired. There are no criminal proceedings in respect of any individual.”

He added: “Every single element of the Baird inquiry has been taken on board – every single one of those recommendations has been implemented – we believe ourselves to be at the forefront of practice.”

‘It’s been three years’

Mark Dove who was also found by the inquiry to have been unlawfully arrested three times and twice unlawfully stripped-searched says he’s been in the complaints system for three years now.

He told Sky News: “There have been improvements in that I’m being informed more, but ultimately there’s no timeline. It’s been three years, and I have to keep pushing them. And I’ve not heard of anyone being suspended.”

Sophie (not her real name), a domestic violence victim who was also found by the review team to have been unlawfully arrested by GMP, told Sky News that although most of her complaints were eventually upheld they had originally been dismissed and no officer has faced any consequences.

She said: “They put on record that I’d accepted a caution when I hadn’t – and then tried to prosecute me. Why has no one been disciplined? These are people’s lives. I could have lost my job. Where is the accountability?”

Since the Baird Inquiry, every strip search by GMP is now reviewed by a compliance team. GMP also provides all female suspects in custody with dignity packs including sanitary products, and they work with the College of Policing to ensure all officers are trained to recognise and respond to the effects of domestic and sexual trauma on survivors.

The deputy mayor for Greater Manchester for policing and crime, Kate Green, says the lessons of the Baird Inquiry should reach all police forces.

She said: “I would strongly recommend that other forces, if they don’t already follow GMP’s practise in not conducting so-called welfare strip searches, similarly cease to carry out those searches. It’s very difficult to see how a traumatising search can be good for anybody’s welfare, either the officers or the detainees. We’ve managed to do that now for well over a year.”

Ms Green also suggests a national review of the police complaints system.

Read more:
Inquiry prompted by Sky news’ investigation
What Baird Inquiry revealed

Deputy Chief Constable Terry Woods, of GMP, said: “Our reformed Professional Standards Directorate (PSD) has increased the quality of complaints handling and improved timeliness.

“Where officers have been found to breach our standards then we have not hesitated to remove them from GMP, with more than 100 officers being dismissed on the chief constable’s watch.

“Out of 14 complaints relating to Dame Vera’s report, four have been completed. Our PSD continues to review and investigate the other complaints.

“We’re committed to being held to account for our use of arrests and our performance in custody.

“By its nature, custody has – and always will be – a challenging environment.

“However, basic provisions and processes must always be met and, while we’re confident our progress is being recognised across policing, we stand ready to act on feedback.”

We’ve got huge news in the 4X4 Ford world with the launch of the first-ever all electric Ford Bronco. Plus, we’ve got a new long-wheelbase Model Y from Tesla and a full-scale d*ck-measuring contest in the world of full self driving. All this and more on today’s episode of Quick Charge!

We’ve also got a $300 million investment from Uber into Tesla Robotaxi rivals Lucid and Nuro and a suitably rapid successor to Lancia’s legendary HF nameplate – that could be an ideal new-age Neon, if Stellantis grows the stones to bring it Stateside.

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