It’s really working as it should, not sure what the issue is on your side. What do you want to override? Loose tags works like regular tags, they just don’t need an effect to exist.
Just because the engine doesn’t use them it doesn’t mean that they don’t work, the functionality is there and you can use it if you want to. I know for a fact that I’ve used it, without any issues
The replication of the tags happens when the ReplicatedLooseTags property replicates. It’s a FMinimalReplicationTagCountMap, and if you check its NetSerialize function, you will find this:
So when the property is replicated, and the updated internal tag map of the struct is sent over the network, the received map overwrites the map that was already there, and then the UpdateOwnerTagMap() call updates the owning Ability System Component’s tags by calling this:
So, short answer, yes, they work just as you’d expect 