HMRC has been accused of using “dangerous and sinister” new tactics in a tax crackdown that has already been linked to 10 suicides.
The government has recently come under pressure over the “Loan Charge” – controversial legislation which made tens of thousands of contractors who were paid their salaries through loans retrospectively liable for tax their employer should have paid.
The clampdown has been branded on par with the Post Office Horizon scandal as the unaffordable bills have been linked to suicides and bankruptcies, while one woman had an abortion due to the financial strain she was under, a debate in parliament heard last month.
HMRC has been criticised for going after individuals – including teachers, nurses and cleaners – rather than the firms that profited from promoting the schemes as tax compliant.
However ministers have resisted pressure to overturn the policy, saying a review conducted by Lord Morse in 2019 resulted in a series of reforms to reduce the financial pressures of the some 50,000 people affected.
Crucially this included cutting the policy’s 20-year retrospective period so only loans received after December 2010 were in scope.
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However it has emerged that HMRC have been pursuing people involved in loan schemes prior to 2010 through a different mechanism – a s684 notice.
This effectively gives HMRC the discretion to transfer a tax burden from an employer to an employee for the tax years excluded from the Loan Charge.
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Conservative MP Greg Smith, co-chair of the Loan Charge APPG, said it “flies in the face” of what Lord Morse intended and risks more people taking their own lives because of the unaffordable bills.
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Loan scheme causing tax turmoil
‘I could lose my home’
Sky News spoke to people who said they had experienced suicidal thoughts and feared becoming homeless after unexpectedly receiving the notices.
While the s684s don’t state how much tax is owed, one father-of-three said his bill could be as high as £250,000 as this is how much HMRC have previously tried to claw back from his time in a loan scheme pre-2010.
The IT consultant, who asked to remain anonymous, said he attempted to settle his tax affairs years ago but communication with the tax office “fizzled out” and following the Morse review he believed the “nightmare” was behind him.
Then in November he received a brown envelope containing an s684 and now he is worried HMRC is “going to absolutely hammer me” just as he is approaching retirement age.
“I have three children and in the worst case scenario I will lose my home.
“I can’t think of another government policy that has caused so much suffering. I fear this could really push some people over the edge.”
Image: Wreathes to honour the suicides linked to the tax crackdown. There have now been 10 confirmed by HMRC
‘Dreadful landscape’
It is not clear how many people have been sent the notices.
The government previously estimated that 11,000 people would be removed from the Loan Charge by introducing the 2010 cut off.
While the Loan Charge is seen as particularly punitive because it adds together all outstanding loans and taxes them in a single year, often at the 45% rate, the notices mean HMRC can use its own discretion to turn off an employer’s PAYE obligations and seek the income tax that would have been due that year from the employee instead.
Rhys Thomas, director of the WTT tax firm, told Sky News: “There is considerable and understandable confusion amongst taxpayers that when the Morse review removed the loan charge for payments pre 9th December 2010, it was assumed that HMRC had no further recourse for those years.
“Where enquiries were outstanding for the earlier tax years, HMRC will seek to conclude these by utilising tools such as s684 notices.”
He called the situation a “dreadful landscape” as those in receipt of the notices only have 30 days to respond to HMRC over something “that has taken them 15 years to investigate”.
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There is no right to appeal the notices, so the only way to challenge HMRC is through a costly Judicial Review.
“It’s causing a huge amount of distress and anxiety; it’s hugely concerning and for lots of people it’s come as a surprise,” Mr Thomas said.
WTT is representing around 200 people who are challenging the notices, saying HMRC has not done enough to go after the core parties who should have collected the tax at the time.
A spokesperson for HMRC said the Morse Review “recommend we use our normal powers to investigate and settle cases taken out of the Loan Charge”.
They said they had been issuing the notices since May 2022, having won a case at the Court of Appeal over their use in relation to loan schemes, “so it’s not a sudden change”.
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But campaigners disputed the use of the notices as “normal” and said it is another example of HMRC “abusing its power” to go after individuals rather than the companies that ran and promoted the loan schemes.
These became prolific in the 2000s and saw self-employed contractors encouraged to join umbrella companies that paid them their salaries through loans which were not typically paid back.
HMRC has argued those who signed up to the schemes are tax evaders who need to pay their fair share. But those affected claim they are victims of mis-selling as the arrangements were widely marketed as legitimate by the scheme promoters and tax advisers, and in some cases they had no choice but to be paid this way.
IT consultant Daniel (not his real name), from Stoke, said he did not stand to make any money from the scheme he joined in 2008 and was simply trying to avoid falling foul of complex off-payroll rules known as IR35.
His tax adviser said the scheme was HMRC compliant and the company said they “would sort out my taxes”, he added.
Image: Loan Charge protest
He said he “did not hear a peep” from HMRC during his time in the scheme and his payslip looked normal as around 20% was being deducted from his salary each month – money experts say will have gone into the profits of those running the company rather than tax to the exchequer.
Now, he is expecting a £30,000 bill after receiving an s684 in November – cash the father-of-four “does not have”.
“If I felt like I had done something wrong I would accept it but I did not make one penny from this scheme, it was all to do with compliance and to make my life as simple as possible.
“This is causing so much stress and frustration. I have had plenty of sleepless nights.
“It feels like the Post Office scandal where we are the little people being backed into a corner and there’s nothing we can do and those who are really guilty are just laughing.”
The notices have renewed calls for the government to find a new solution to the Loan Charge scandal.
Keith Gordon, a tax barrister, said HMRC “is effectively responsible for this mess because they failed to warn employees that they did not like these schemes”.
Image: Keith Gordon said HMRC is targeting individuals because it is an easier way of recouping the money
“Most people, if they got a whiff of HMRC dislike, would have left these schemes but they were sold it as being tax compliant. Why should the blame be on people who were at the very worst merely naïve?”
Campaigners fear the s684s will be used across the board instead of the Loan Charge, which Labour has said it will review if it wins the next election.
Steve Packham, of the Loan Charge Action Group, accused HMRC of being “downright reckless” in light of the 10 confirmed suicides, adding: “This is sinister and dangerous and is another example of how out-of-control HMRC is.
“The government must immediately order a stop to these notices and instead agree to find a resolution to the Loan Charge Scandal before there are more lives ruined.”
Image: Greg Smith, co-chair of the Loan Charge Action and Taxpayer Fairness APPG. Pic: PA
A HMRC spokesperson said: “We appreciate there’s a human story behind every tax bill and we take the wellbeing of all taxpayers seriously.
“We recognise dealing with large tax liabilities can lead to pressure on individuals and we are committed to supporting customers who need extra help with their tax liabilities. We have made significant improvements to this service over the last few years.
“Our message to anyone who is worried about paying what they owe is: please contact us as soon as possible to talk about your options.”
Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK.
Institutional players have been closely watching decentralized finance’s growth. Creating secure and compliant DeFi platforms is the only solution to build trust and attract more institutions.
Clear waters attract big ships
Over the past four years, institutional DeFi adoption has gone from 10% of hedge funds to 47%, and is projected to rise to 65% in 2025. Goldman Sachs is reaching their arms to DeFi for bond issuance and yield farming.
Early adopters are already positioning themselves in onchain finance, including Visa, which has processed over $1 billion in crypto transactions since 2021 and is now testing cross-border payments. In the next two years, institutional adoption will speed up. A compliant regulatory framework that maintains DeFi’s core benefits is necessary for institutional adoption to engage confidently.
DeFi’s institutional trilemma
It is no secret that many DeFi security exploits happen every year. The recent Bybit hack reported a $1.4 billion loss. The breach occurred through a transfer process that was vulnerable to attack. Attacks like these raise concerns about multisignature wallets and blind signing. This happens when users approve transactions without full details, rendering blind signing a significant risk. This case calls for stronger security measures and improvements in user experience.
The threats of theft due to vulnerabilities in smart contracts or mistakes by validators make institutional investors hesitate when depositing large amounts of money into institutional staking pools. Institutions are also at risk of noncompliance due to a lack of clear regulatory frameworks, creating hesitation to enter the space.
The user interface in DeFi is often designed for users with technical expertise. Institutional investors require user-friendly experiences that make DeFi staking possible without relying on third-party intermediaries.
Build it right, and they will come
Institutional interest in bringing traditional assets onchain is enormous, with the tokenized asset market estimated to reach $16 trillion by 2030. To confidently participate in DeFi, institutions need verifiable counterparties that are compliant with regulatory requirements. The entry of traditional institutional players into DeFi has led some privacy advocates to point out that it can counter the essence of decentralization, which forms the bedrock of the ecosystem.
Institutions must be able to trust DeFi platforms to maintain compliance standards while providing a safe and seamless user interface. A balanced approach is key. DeFi’s permissionless nature can be achieved while maintaining compliance through identity profiles, allowing secure transactions. Similarly, transaction screening tools facilitate real-time monitoring and risk assessment.
Blockchain analytics tools help institutions to maintain compliance with Anti-Money Laundering regulations and prevent interaction with blacklisted wallets. Integrating these tools can help detect and prevent illicit activity, making DeFi safer for institutional engagement.
Intent-based architecture can improve security
The relationship between intent-based architecture and security is evident; the very design is built to reduce risks, creating a more reliable user experience. This protects the user against MEV exploits, a common issue of automated bots scanning for large profitable trades that can be exploited. Intent-based architecture also helps implement compliance frameworks. For instance, restricting order submissions to clean wallets and allowing resolvers to settle only the acceptable orders.
It’s well understood that in traditional DeFi transactions, users rely often on intermediaries like liquidity providers to execute trades or manage funds. This leads to counterparty risk, unauthorized execution and settlement failure. The intent-based architecture supports a trustless settlement that ensures users commit only when all conditions are met, reducing risk and removing blind trust from the picture.
DeFi platforms must simplify interactions and UX for institutional investors. This system bridges the gap between. Through executing offchain while ensuring security, the intent-based architecture makes DeFi safer and more efficient. However, one of the challenges to this includes integrating offchain order matching while maintaining onchain transparency.
Late adopters of DeFi will struggle to keep up
For the early adopters of DeFi, there is a competitive advantage in liquidity access and yield advantages, whereas late adopters will face more regulatory scrutiny and entry barriers. By 2026, the institutional players that have failed to adopt DeFi may struggle to keep up. This is seen in the examples of early adopters like JPMorgan and Citi’s early tokenization projects. TradFi leaders like them are already gearing up for onchain finance.
The way forward
Regulatory bodies, supervisory agencies and policy leaders must provide clear, standardized guidelines to facilitate broader institutional participation. Uniform protocols underpinning wider institutional involvement are underway. DeFi platforms must be prepared beforehand to provide all the necessary pillars of compliance and security to institutional players who want to embrace mainstream adoption. Executing this shall require combined efforts from regulators, developers and institutions.
Opinion by: Sergej Kunz, co-founder of 1inch.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Prediction marketplace Kalshi has started taking Bitcoin (BTC) deposits in a bid to onboard more crypto-native users.
The company that lets users bet on events ranging from election outcomes to Rotten Tomatoes film ratings has seen a strong uptake among crypto traders, Kalshi told Cointelegraph on April 9. For instance, event contracts for betting on Bitcoin’s hour-by-hour price changes have seen $143 million in trading volume to date, a spokesperson said.
Kalshi is a derivatives exchange regulated by the US Commodity Futures Trading Commission (CFTC). As of April 9, it listed some 50 crypto-related event contracts, including markets for betting on coins’ 2025 highs and lows, as well as on headlines such as US President Donald Trump’s proposed National Bitcoin Reserve.
Kalshi has doubled down on crypto event contract markets. Source: Kalshi
The platform started accepting crypto payments in October when it enabled stablecoin USD Coin (USDC) deposits.
Kalshi relies on ZeroHash — a crypto payments infrastructure provider — for off-ramping BTC and USDC and converting the deposits to US dollars. The exchange accepts BTC deposits only from the Bitcoin network.
Most Kalshi traders no longer expect core tokens to earn positive returns this year. Source: Kalshi
It became a top venue for trading on 2024 political events after winning a lawsuit against the CFTC, which tried to block Kalshi from listing contracts tied to elections.
The regulator argued that political prediction markets threaten the integrity of elections, but industry analysts say they often capture public sentiment more accurately than polls.
For instance, prediction markets, including Kalshi, accurately predicted Trump’s presidential election win even as polls indicated a tossup.
“Event contract markets are a valuable public good for which there is no evidence of significant manipulation or widespread use for any nefarious purposes that the Commission alleges,” Harry Crane, a statistics professor at Rutgers University, said in an August comment letter filed with the CFTC.
In March, Kalshi partnered with Robinhood to bring prediction markets to the popular online brokerage platform. Robinhood’s stock rose some 8% on the news.
Kalshi competes with Polymarket, a Web3-based prediction platform. Polymarket processed more than $3 billion in trading volumes tied to the US presidential election despite being off-limits for US traders.
United States securities laws are not flexible enough to account for digital assets, as evidenced by the parade of crypto-native companies that have tried and failed to get into the Securities and Exchange Commission’s (SEC) good graces, Rodrigo Seira, special counsel to Cooley LLP, told a House Committee hearing on April 9.
The hearing, titled American Innovation and the Future of Digital Assets Aligning the U.S. Securities Laws for the Digital Age, featured Seira, WilmerHale partner Tiffany J. Smith, Polygon chief legal officer Jake Werrett and Alexandra Thorn, a senior director at the Center for American Progress.
“It is clear that the current securities regulatory framework is not a viable option to regulate crypto. It fails to achieve its stated policy goals,” Seira said in his opening remarks. “[T]he idea that crypto projects can come in and register with the SEC is demonstrably false.”
Seira acknowledged that crypto promoters who raise capital for a new enterprise should be subject to federal securities laws.
“In practice, however, virtually no crypto projects have successfully registered their tokens under federal securities laws and lived to tell the tale,” he said, adding:
Projects that tried to comply with [the] SEC’s current regulatory requirements expended significant resources and effort only to fail or survive in a state of regulatory uncertainty. Moreover, registration is not a simple one-time process. Registering a token in the same manner as a stock triggers an obligation to operate as a publicly reporting company […].”
In introducing the witnesses, Representative Bryan Steil, who heads the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence, acknowledged regulatory roadblocks, which he said were put in place by the previous administration.
Under President Donald Trump, lawmakers are attempting to right the ship by passing sensible legislation, said Steil.
One of the first steps occurred last week when the House Financial Services Committee advanced the STABLE Act, which is designed to regulate payment stablecoins tied to the US dollar and other fiat currencies.
A month earlier, the Senate Banking Committee advanced the GENIUS Act, which aims to regulate stablecoin issuers by establishing reserve requirements and requiring full compliance with Anti-Money Laundering laws.
The next step is “advancing the second half of this agenda: comprehensive digital asset market structure legislation,” said Steil.
Representative Ro Khanna told a digital asset conference last month that a market structure bill will cross the finish line this year.
The purpose of such legislation is to establish a clear regulatory framework for digital assets, including their legal categories and the enforcement jurisdiction of agencies such as the SEC and Commodity Futures Trading Commission.