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The Loan Charge was introduced to tackle any tax loopholes associated with using tax avoidance loan schemes, that work in different complex ways to avoid or minimise the usual tax associated with income received. Gorilla Accounting previously wrote an in-depth article telling you everything you need to know about the Loan Charge 2019, where you can learn more about this important subject.

The Loan Charge is already having an effect on the lives of 50,000 self-employed contractors across the UK, from IT professionals to nurses and teachers, who are worried the charge will lead to more limited companies going bankrupt and homes being lost.

HMRC and the Loan Charge

In 2018, thousands of contractors, freelancers and agency workers received letters from the government saying that they’ve been involved in tax avoidance schemes considered to be ‘disguised employment’. These letters also encouraged self-employed individuals to settle the issue voluntarily. For many, this marked the first time they were told there were issues regarding their pay.

Many contractors received their earnings as a loan for years, instead of income, which meant they avoided paying taxes and National Insurance. HMRC believes these loans were never intended to be paid back and, because of this, count as income and should be taxed.

By the January 31st deadline, HMRC expects to receive £3.2 billion in backdated taxes.

The Human Impact of the Loan Charge

The Loan Charge is an issue we take very seriously as contractor accountants. After all, contractors across the country are now being asked to pay amounts in the order of hundreds of thousands of pounds. But the Loan Charge is costing people more than just money. Self-employed contractors face losing their livelihoods and homes because of the amount of backdated tax they are being forced to pay.

In fact, there have already been reports of contractors having to sell their home to pay their tax bills, as well as reports of many at risk of going bankrupt.

The Loan Charge has been controversial since its inception, especially because everything self-employed individuals did to cut their taxes up to twenty years ago was not against the law – and they didn’t think they were doing anything wrong. In the nineties and noughties, self-employed contractors were paid in loans and saw their tax burden lowered, something that was legal at the time. In addition, many had no choice but to engage in loan-schemes, as employers made it a condition of employment.

However, this is not being taken into consideration, since individuals are still being held responsible, even if badly advised by a loan scheme professional, accountancy firms, employers or recruitment agencies.

The Loan Charge is also impacting contractors’ mental health, as the policy has been linked to a number of suicides, with HMRC themselves reporting a case to the Independent Office for Police Conduct, which investigates complaints that involve HMRC. The BBC has also reported the suicide of a consultant engineer in his late sixties who was affected by the Loan Charge; he became obsessed with the issue and spent most of his time trying to find a way to get through it. His daughter has been urging the government to suspend this tax policy in order to save lives.

Public Criticism of the 2019 Loan Charge

The clear impact of the policy in people’s lives has led many to speak out against it. MPs have been urging prime minister Boris Johnson to keep his promise of suspending the Loan Charge, which seeks for contractors to pay up to 20 years’ worth of tax in a single year. While campaigning for Conservative leadership, Johnson said that “it seems superficially unjust that [those affected by the Loan Charge] should be retrospectively pursued”¦ they need an independent review”. However, he is yet to take measures towards this.

Vince Cable, previous Lib Dem leader, is requesting an independent review into the risk of this legislation as well, as he also believes it to be causing “bankruptcies, damage to livelihoods and loss of homes”. David Davis has been outspoken in his dislike of the policy too, saying that “the retrospective application of the 2019 Loan Charge is absolutely wrong. If the government doesn’t put it right, then I and the House of Commons will act to limit HMRC’s ability to take retrospective action against hard-working taxpayers”.

Over 200 MPs have called for the suspension and independent review of the Loan Charge, with 151 MPs joining an All-Party Parliamentary group on the Loan Charge, a movement that aims to highlight the concerns about the impact of the policy.

Loan Charge Support

HMRC have said that they “know that facing a large tax bill can be stressful, and our teams will make sure that anyone who needs extra help receives support from a named contact who is trained to support people who are anxious or stressed”. However, HMRC did not take action when asked by the Loan Charge Action Group (LCAG) to create a dedicated helpline, so the organisation ended up setting one up to help distressed contractors.

This LCAG Loan Charge helpline is staffed by trained counsellors who aim to help in any way they can.


It’s clear that the Loan Charge has had – and continues to have – a severe impact on people’s lives, including in regard to their mental health, their livelihoods or their homes. Therefore, it’s vital that the policy is, at least, reviewed, as most believe that something needs to be done to minimise its impact on self-employed contractors’ lives.

We’ve been limited company accountants for many years and are aware of the pitfalls of the 2019 Loan Charge – Our stance has always been to avoid any schemes that seem too god to be true and contact your accountant if you are thinking of using a loan scheme.  Whether you wish to discuss this issue or any other service we offer at Gorilla Accounting, we can help you to handle the financial side of your business, so talk to us today to discuss your needs.