Contractor loans settlement deadline approaching
Contractor loans were one of the early areas of investigation by HMRC whereby the legality of a system of offshore payments made to contractors was called into question. A tribunal found that the scheme, which utilised offshore companies to make ‘loan’ payments to contractors working in the UK, did not exempt those using it from paying tax on their income.
The tribunal judge found that the scheme did not exempt the contractor in question, Philip Boyle, from paying tax, and as a result, the precedent was set and everyone involved in similar schemes was required to repay any tax owed on sums that had been paid to them in this way.
Last July, thousands of individuals received letters from HMRC offering them the chance to utilise the Contractor Loans Settlement Opportunity in order to put an end to the arrangements that they had in place. The department have reason to believe that all similar ‘loans’ are taxable and are using their success in the original case to support their position in pursuing settlements from those with bills outstanding.
The Contractor Loans Settlement Opportunity was designed to be a one-off system which would allow those who had used such schemes to pay off the tax that they owed in the form of a settlement. The original deadline was to be the 9th of January 2015, but has been extended until the 30th of June 2015. HMRC has made it clear that they fully intend to prosecute anyone who fails to settle under the CLSO scheme.
This opportunity is only open to those who were involved in loan arrangements up until the 5th of April 2011. Those who entered into schemes after that date would come under the ‘Disguised Remuneration’ rules which came into force on the 6th of April 2011, and their cases will be considered separately by HMRC if they are contacted by those affected.
The CLSO is generally considered to offer beneficial terms to those who qualify, with no National Insurance being applied to the sums in question and payment schemes being agreed with those who are unable to settle via a lump sum. HMRC have drafted I additional staff to help deal with the backlog and have extended the deadline in order to allow as many people as possible to avoid costly and time-consuming litigation, so those who wish to use the CLSO will need to inform them of their intention to do so by the end of June.
If you are a contractor and want to avoid getting caught up in any controversy, then using a specialist accountant could save you time and money. Because we deal with contractors every day, we can advise on everything from IR35 to the advantages and disadvantages of operating as a limited company. To find out what we could do for you and learn more about our fixed-fee packages, call today on 01442 275789 or email email@example.com for more details.