Contractor loan schemes draw HMRC’s attention
Tax avoidance schemes which rely on a contractor being paid in the form of a ‘loan’ are coming under the taxman’s spotlight as they are the target for the department’s latest anti-avoidance campaign. The campaign is HM Revenue and Customs’ attempt to remind people that schemes like this are not legal and do not work, and to this end the campaign has a series of recommendations for those who have invested their money into such schemes.
The advice is for contractors or freelancers who have used a scheme whereby they are paid a minimal proportion of their contract value with the remainder being handed over in the form of a ‘loan’ which is written off by the lender. The department is recommending that they withdraw any money that they have tied up in such a scheme and contact HMRC to sort out their tax affairs in order to ensure that they don’t have any outstanding monies owed.
Those who do not choose to take this advice should consider themselves warned: scheme users who fail to settle could be hit with penalties, interest payments and the costs of litigation should it get that far. By getting in touch with HMRC in a pro-active manner, contractors have been promised that the outcome will be favourable for them, and any penalties will be minimal compared to if they are caught.
There is a little controversy over the way this campaign is being administered, with some contracting organisations claiming that HMRC is scaremongering and using threatening language in order to intimidating contractors into settling when there is no proof that the schemes in question would not be declared legitimate should it come before a tax tribunal or court.
While there is no doubt that some schemes will be found to be an abuse of the regulations, there are those who claim that some schemes could withstand the scrutiny of a court case, but systems which appear to offer ‘loans’ which are then written off have not fared well in previous cases.
Anyone wishing to save money would be best placed taking specialist advice rather than risking the possibility of getting caught out by an avoidance scheme, then a specialist contractor accountant is always the best way to find legitimate ways to save. If you want to know more about contractor tax then our guide could help you, and to get an idea of how much you could earn as a contractor then our take home pay calculator is ideal for getting your head around the figures.
For details of our specialist services and low-cost packages designed to help contractors to make the most of their income, call our friendly team today on 01442 275789 or email email@example.com.