The loan charge and contractor loan schemes

From the early 2000s a part of the contracting market was paid through arrangements that were not salary and not dividends. The worker received a small salary and the balance as a loan from an offshore trust or a company, on terms under which the loan was never expected to be repaid. Promoters sold the schemes as lawful, often with counsel's opinion, and paid agencies and umbrellas to recommend them. Tens of thousands of contractors used them.

The response

HMRC's position throughout was that the loans were disguised remuneration and taxable as income when paid. The disguised remuneration legislation of 2011 stopped new arrangements of the original kind, and the Finance Act 2014 gave HMRC the power to demand disputed tax up front through accelerated payment notices. Many contractors received notices for years of income at once. Many others were never contacted at all, because the promoter had disappeared and the individual did not appear on HMRC's radar until the loan charge.

The loan charge

Announced in the 2016 Budget and effective on 5 April 2019, the loan charge treated every outstanding disguised remuneration loan made since 1999 as income of the 2018-19 tax year, taxing the accumulated balance at once and at that year's rates. The scale of the resulting bills, the retrospective reach and the reports of suicides among those affected produced a campaign that has not stopped. The Morse review of December 2019 moved the start date to 2010 and removed the charge for years HMRC could have pursued but had not. A second independent review reported in 2025.

The 2026 settlement scheme

Regulations made on 14 July 2026 created a settlement scheme that came into force on 5 August. Every bill is reduced by £5,000, with a further reduction of up to £10,000 for each year a scheme was used, capped at £70,000; late payment interest is removed; payment can be spread over five years or longer. HMRC says most people will see their bills at least halved and around a third could pay nothing. Letters went out from late July, each with a named caseworker and at least 90 days to respond. The contractor bodies and campaigners regard the terms as an improvement and the underlying charge as unfair, particularly for those who settled earlier on worse terms.

For anyone affected

Read the letter, obtain the figures, and take advice before the acceptance period ends. The scheme's terms are the best offered so far and will not be improved by waiting. The articles below cover the schemes, the notices, the charge and the reviews as they happened.