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.

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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.

The UK’s unemployment rate has risen to a four-year high, in a surprise deterioration that boosts the case for a Bank of England interest rate cut.

The Office for National Statistics (ONS) reported a rise in the jobless rate from 4.6% to 4.7% in the three months to May.

No change had been expected after the 0.1 percentage point rise seen just last month.

The ONS data, which still comes with a health warning due to poor participation rates, also showed a reduction in the pace of wage rises, with average weekly earnings rising by 5%. That was down from the 5.2% level reported a month ago.

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ONS director of economic statistics, Liz McKeown, said of its findings: “The labour market continues to weaken, with the number of employees on payroll falling again, though revised tax data shows the decline in recent months is less pronounced than previously estimated.

“Pay growth fell again in both cash and real terms, but both measures remain relatively strong by historic standards.

“The number of job vacancies is still falling and has now been dropping continuously for three years.”

The data was released 24 hours after a surprise rise in the rate of inflation, to 3.6%, was revealed by the ONS.

It was seen as muddying the waters as the Bank considers the timing of its next interest rate cut.

But a quarter point reduction, to 4%, is widely expected at the next meeting of the rate-setting committee in early August,

The Bank, experts say, will be looking past the headline inflation numbers and see scope to introduce the third cut of the year due to the softening labour market seen in 2025 – a factor the Bank’s governor Andrew Bailey had suggested would come more into focus in a recent interview with The Times.

Weaker pay awards remain a compulsory element to bringing down borrowing costs as there are fears the UK’s difficulties in bringing down inflation are partly linked to wage growth outpacing price hikes since August 2023.

Add to that the slowdown in economic growth and you have a Bank seemingly grappling the effects of so-called stagflation – as scenario of weak growth with inflation persistently well above the Bank’s 2% target.

While there are conflicting forces at play for the Bank’s interest rate deliberations, rising inflation, coupled with weakening growth and jobs data, are all unwelcome for a chancellor under growing pressure.

Rachel Reeves was accused on Wednesday of contributing to inflation through taxes on employment deployed from April – with industry bodies in the grocery sector claiming an element of rising food price growth was down to businesses passing on those extra costs, alongside hikes to minimum pay requirements.

At the same time, those budget measures have clearly held back hiring since the spring.

One crumb of comfort for her is that the prospect of a rate cut next month remains on – with any reduction helping bring down the cost of servicing government debt as the headroom she has within the public finances remains under severe pressure.

Government U-turns on winter fuel payment curbs and welfare reforms have squeezed her fiscal rules, leaving her to cover likely at the autumn budget to cover shortfalls either through further tax hikes or spending cuts.

Yael Selfin, chief economist at KPMG UK, said of the rate cut prospects: “Slowing activity in the labour market, coupled with pay pressures easing, will likely prompt the Bank of England to lower interest rates next month.

“The impact of April’s tax and administrative changes has led to a marked slowdown in hiring activity among firms. With domestic activity remaining sluggish, the MPC will likely want to provide support via looser policy to prevent a more significant deterioration in the labour market.”

Jaguar Land Rover (JLR) has revealed plans to cut 500 jobs as it moves to save costs while battling a sharp decline in sales.

The UK-based firm said the reduction in management roles, which amounted to 1.5% of its workforce, would be completed through a voluntary redundancy programme.

JLR has been struggling recently on the back of the US trade war.

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It temporarily paused exports to the US, its biggest single foreign market, in April after Donald Trump’s hike to duties covering cars to 25%.

It was later trimmed to 10% under the US-UK trade truce agreement, but that rate only covers the cars it makes in the UK.

The terms of the deal also cap total annual car exports to the US at 100,000 models, so the higher rate will apply to those vehicles exceeding the threshold.

The tariff uncertainty, coupled with a planned wind-down of older Jaguar models, meant sales were 15% down over the three months to June to just over 94,000.

JLR confirmed its job cut plans on the day the UK’s jobless rate hit a four-year high.

It also follows on the back of a Kier Starmer speech to staff, promising to protect their jobs, back in April.

The company had said, after the US-UK truce in May, that the deal would do just that.

A spokesperson said: “As part of normal business practice, we regularly offer eligible employees the opportunity to leave JLR through limited voluntary redundancy programmes.”