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January's round up of the latest tax investigation news and cases:
HMRC has started sending additional letters to individuals affected by the loan charge and eligible for McCann Review relief, but the Loan Charge Action Group (LCAG) says the settlement "ignores reality."
This follows initial communications sent in 2025 advising those affected whether HMRC thought the disguised remuneration arrangements they used would be considered by the review of loan charge repayments.
HMRC has now started reviewing taxpayers' arrangements and has started sending out letters from January 2026. In these letters, taxpayers are given a named HMRC contact and are told "if and how their position is affected by the outcome of the review."
In an update on the website, HMRC stated: "If a customer's arrangements are covered by the recommendations of the review accepted by the government, then, at a later date, you should receive an invitation to settle at a reduced amount."
The loan charge settlement scheme is open to anyone with outstanding loan charge liabilities, including employers, but promoters of tax avoidance schemes will not be able to use the settlement scheme.
However, it is limited to a maximum reduction for any one taxpayer of £70,000 against the loan charge amount they owe including interest, as determined by HMRC calculations.
Importantly, instead of being charged at the tax rates that applied to the loan charge and all other income in 2019, the new figure will be worked out based on the tax rates the individual would have paid in the years the loans were made.
This new amount will be reduced to account for historic promoter fees, up to a maximum discount of £10,000 per year that the individual used a loan scheme. This total will be further reduced by £5,000 as part of the framework designed following the McCann review, and approved by the Treasury.
Importantly, late payment interest will be written off in the calculation of the new amount, potentially reducing the amount owed by around 20%, HMRC said.
Any inheritance tax already due because of the use of loan schemes covered by the settlement will be written off, and penalties will not be charged as standard.
If payment of the loan charge in full is not viable, it is possible to set up a payment arrangement tailored to the individual's ability to pay. "This can be paid over five years, without having to discuss affordability with HMRC. Forward interest will apply as normal for payment via instalments," HMRC added.
Last month, the Loan Charge Action Group (LCAG) warned Chancellor Rachel Reeves that the government's implementation of the McCann Review would "fail to resolve the loan charge scandal, leaving thousands of people unable to settle, prolonging serious mental health harm and storing up years of further cost and controversy for HMRC and the Treasury."
The group wrote to the chancellor on 23 January criticising the outcome of the McCann review, stating that it only reviewed settlement terms and failed to address the fundamental problems with the loan charge itself. In its view, the McCann Review is "an administrative mess and costly burden for HMRC," and too restrictive as there is a £70,000 limit on settlement reductions.
Steve Packham, co-founder of the Loan Charge Action Group, said: "Responsibility for the ongoing scandal now rests squarely with the current government and we urge ministers to wake up and make changes that would at least allow some people to have a chance of ending this nightmare."
The group is also calling for the government to review the decision to exclude people who settled their loan charge under the previous rules, and wants to see changes in the Finance Bill currently going through parliament, with calls for an end to the "10-year strategy of ignoring reality and peddling propaganda."
"It is scandalous that those who settled with HMRC, many under considerable duress and all in the belief that they would otherwise face far higher demands, are not to be given the same terms put forward by the McCann Review," railed Packham.
"People did exactly what ministers and HMRC told them to do - settle - and are now being punished for it. That is a fundamental breach of natural justice."
The implementation of the McCann Review settlement scheme represents a significant development in the long-running loan charge controversy, offering relief to many affected taxpayers through reduced liability calculations and interest write-offs. However, the exclusion of those who previously settled and the £70,000 cap on reductions continue to generate substantial criticism from advocacy groups, highlighting ongoing tensions between government policy objectives and the concerns of those impacted by disguised remuneration schemes.
A "complex web of deceit" was dismantled after a finance administrator named an £800 payment to her own bank account as "Tesco milk."
Elizabeth Henderson, 66, of Uttoxeter in Staffordshire, appeared at Stafford Crown Court on Tuesday 10 February where she was handed a jail term of two years and six months after previously admitting fraud by abuse of position.
Henderson was finance administrator at Kirk House Nursing & Residential Home in Uttoxeter since September 1995. The court heard that between January 2018 and April 2024, she stole £212,228, transferring money from company accounts directly to her own bank account.
The fraud was identified when a new member of staff joined Henderson in the home's finance team. Upon carrying out standard checks, they spotted an £800 payment to Henderson's personal bank account which she had called "Tesco milk," the court heard.
Further checks then revealed the extent of the fraud and the money stolen. On one occasion, it was found that Henderson had paid herself more than £4,000, purporting to have sent the funds to a care agency used by the home. She used real supplier invoices multiple times to avoid suspicion and continue to siphon off funds.
Henderson was dismissed from her role at the care home in April 2024, following an internal investigation before Staffordshire Police were alerted to the fraud.
Following the sentencing, investigating officer Martin Ottey, said: "This was a calculated and complex web of deceit from Henderson who was determined to fraudulently garner funds for her own gain. Thanks to the immediate investigatory work by the care home and ourselves, we were able to present a full picture of Henderson's offending. I am pleased she admitted the fraud in court and that she has been handed a significant custodial sentence."
This case demonstrates the critical importance of proper financial controls and oversight in organizational finance departments. The detection of the fraud through routine checks by new staff highlights how fresh perspective and diligent verification procedures can uncover long-running financial misconduct, even when perpetrators have established sophisticated methods to disguise fraudulent transactions using legitimate supplier information.
The substantial sentence reflects the serious breach of trust involved when individuals in positions of financial responsibility exploit their access for personal gain over extended periods.
A hedge fund founder has lost his appeal against a six-figure penalty from HMRC after the tribunal rejected the Russian invasion of Ukraine as a "reasonable excuse" for late payment of his tax bill.
In this case at the First Tier Tribunal (FTT), the appellant brought an appeal against a penalty for late interest of £219,284, arguing it should be overturned due to circumstances beyond his control which meant he was unable to pay his tax on time.
His 2021-22 tax bill was settled over six months late, as the appellant argued he had insufficient funds due to existing financial commitments, failure to realise investments and sell some companies, and a huge hike in interest rates due to the outbreak of war in Ukraine.
The appellant is the executive chairman, co-founder and a partner at Stirling Square Capital Partners (SSCP), a private equity firm, which was set up in 2002, and by March 2025 was raising its fifth fund.
This is an appeal against late payment penalties charged under Schedule 56, Finance Act 2009 (FA 2009) for the late payment of tax for the year ending 5 April 2022.
The HMRC penalties totalled £219,284, made up of £157,915 for a 30-day late payment penalty issued on 14 March 2023, and a six-month late payment penalty of £61,369, issued on 15 August 2023.
The appellant did not attend the tribunal hearing in December in person as he was in Brazil for business meetings related to a company where he was chairman, and furthermore could not contribute via video call.
The day before the hearing was scheduled, his barrister, Rebecca Murray of Devereux Chambers, informed the tribunal the appellant did not have permission from the relevant authorities in Brazil to give evidence to the UK tax tribunal and confirmed that it would not be possible for HMRC to cross-examine him nor for the tribunal to ask any questions on his witness evidence and statement.
There was also an issue with the appellant's witness statement, which was submitted late and HMRC called for it to be excluded from the evidence bundle.
Judge Ruthven Gemmell stated: "The tribunal could ascribe no weight to the witness statement as it was submitted late and could not even be confirmed by the appellant."
As a result, the tribunal refused to admit the witness statement as it was submitted late and because the appellant could neither give evidence nor refer to the witness statement, nor be examined, cross examined and questioned by the tribunal.
However, the tribunal heard that the appellant's liquidity issue arose due to a number of factors arising in late 2021 through to January 2023, exacerbated by the financial pressures as a result of the Ukraine war. He was facing personal cash flow constraints due to various financial transactions related to capital commitments and investments related to SSCP, use of some of his funds for a down payment for a property purchase in Milan and long-term donation commitments to New York University.
In January 2022, the appellant paid €319,000 (£276,000) to HMRC, but by the time the next tax was due for 2021-22 tax year at the end of January 2023, his financial position was hugely constrained.
By January 2023, he had to pay significant personal expenditure totalling €3 million to cover three mortgage payments for properties in London, New York and Milan amounting to €1.6 million, university fees and related costs of €200,000 for his children, his own personal living costs of €800,000, and approximately €400,000 for property restructuring costs. After paying these outgoings, the tribunal was told this left him with a negative income of €500,000.
He discussed with his accountant whether to request an extension of his tax bill of £4.27 million for the 2021-22 tax year, by asking for a time to pay arrangement for five months, as had been set up with HMRC in an earlier tax year. But the debt management team would not accept his repayment plan and passed the case on to HMRC's enforcement and insolvency service (EIS).
In the event, the appellant settled his tax bill in full on 7 August 2023, albeit over six months late.
But on 15 August, HMRC issued penalties for 5% of the tax liability under paragraph 3(3), Schedule 56 FA 2009. This was appealed in September 2023, arguing the appellant's time to pay (TTP) offer was "unreasonably rejected by debt management service on 6 April 2023," and "the same offer was later accepted by EIS without any modification, although there was no formal agreement in place."
HMRC refused to overturn the penalties, stating in a letter dated 5 August 2024: "No explanation for the shortage of funds had been provided by the appellant and that the TTP proposal was unacceptable."
At the appeal hearing, the tribunal heard that in February 2022, when Russia invaded Ukraine "interest rates rose to levels not seen in 15 years and mergers and acquisitions activity dropped to low levels."
As a result, SSCP found it very challenging to complete the investment disposals it had "rightly planned to execute, pre-Ukraine war, as business purchasers simply stayed on the sidelines of the mergers and acquisitions market."
His legal team argued that the appellant "had every expectation that he would have sufficient funds to meet his tax liabilities but, in February 2022, Russia invaded Ukraine and so the funds he was expecting to receive did not materialise."
At tribunal, his accountant said the appellant was "extended and exposed in all directions and had to actively look to the necessary credit and time to pay arrangements to meet his upcoming liabilities."
Having assessed the arguments, Judge Gemmell stated the appellant "had the funds to pay his tax liability, but it was his choice not to do so, and we agree with HMRC's submission that this decision to treat repaying his bankers as a priority over paying his tax liability was within his control."
The tribunal also found the appellant "was not willing to default on or renegotiate on mortgage payments for his three properties in London, New York and Milan nor on his family commitment to New York University and instead preferred payment of some or all his financial commitments over his commitment to pay his tax liabilities. That was his choice but a choice within his control," the ruling stated.
The tribunal determined that there was not a reasonable excuse for the failure to pay the penalty total, citing paragraph 16 of Schedule 56 FA 2009.
Accordingly, the appeal was dismissed.
An HMRC spokesperson said: "We welcome the decision of the tribunal, which agreed that our late payment penalties were correctly issued."
This ruling establishes important precedent regarding what constitutes a "reasonable excuse" for late tax payment. The tribunal's decision makes clear that external economic events, even those as significant as geopolitical conflicts affecting global financial markets, do not automatically provide reasonable excuse when taxpayers have made conscious decisions to prioritize other financial obligations over tax liabilities. The case underscores that individuals with substantial assets and multiple financial commitments cannot claim inability to pay when they have chosen to allocate available resources to other purposes.
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