Loan charge settlement letters go out with the promise that a third will pay nothing

HMRC has begun writing to thousands of people with outstanding loan charge liabilities under the settlement scheme that came into force on 5 August, and its central claim is that around a third of them could settle without paying anything at all.

The scheme follows the independent review of the loan charge announced in 2025 and the regulations made on 14 July, which were laid before Parliament the following day. The first settlement letters went out in the week beginning 27 July. Each recipient has a named caseworker, a minimum of 90 days to accept, and in most cases longer.

The terms

The reductions are cumulative. Every customer's bill is reduced by a flat £5,000. A further reduction of up to £10,000 applies for each year an avoidance arrangement was used, capped at £70,000 for any individual. Late payment interest is removed entirely. Payment can be spread over five years as standard, with longer arrangements available where circumstances justify them. HMRC says most people will see their bills fall by at least half, and that for some the combination of reductions takes the liability to zero.

Jonathan Smith, HMRC's director of counter avoidance, said some people would see their bills reduced to nothing, and that this was why the department needed them to engage with it. The instruction to anyone receiving a letter is to respond as soon as possible.

The sceptics

The contractor advisers who have followed the loan charge since it was announced in 2016 are not persuaded that the scheme resolves the grievance. Dave Chaplin, chief executive of ContractorCalculator, said HMRC was cherry-picking the best-case scenarios from a wide range of potential impacts. Crawford Temple, chief executive of Professional Passport, described the offer as too little, too late, and warned that it risked adding another layer of unfairness.

The unfairness argument has two parts. The first is that the people receiving letters were, in most cases, told by the promoters of the schemes that the arrangements were lawful, paid fees for that assurance, and have been pursued while the promoters have not. The second is that settlements agreed under earlier, harsher terms are not reopened, so a contractor who settled in 2019 on advice that it was the best available outcome has paid more than a neighbour who held out.

Who is affected

The loan charge applies to loans made through disguised remuneration schemes since 2010, after the 2019 review narrowed the original 1999 start date. The typical case in this industry is an IT contractor who was paid a small salary and received the balance as a loan from an offshore trust between the mid-2000s and the mid-2010s, often on the recommendation of an agency or an umbrella. Tens of thousands of people fall within the charge, and a significant number have never settled or agreed a payment plan.

For those people the advice from every quarter, including the advisers who dislike the scheme, is the same: read the letter, work out the figures, and take advice before the acceptance period expires. The settlement terms are better than any previously offered. Whether they are fair is a separate question, and one the scheme was not designed to answer.