Contractor loan schemes targeted
A consultation document published earlier this year, on the back of an announcement by the Chancellor, set out the Government’s plans to create an Income Tax and NICs charge on offshore intermediaries employing workers in the UK. The consultation entitledOffshore employment intermediaries closed for comment on 8 August 2013 and new legislation is expected to be introduced in Finance Bill 2014.
Pending further information on the results of the consultation, HMRC have recently confirmed that it is to challenge contractor loan schemes used by contractors and other professionals to avoid tax by entering into a contract of employment with an offshore employer, while providing their services in the UK.
Under this scheme, users receive a substantial proportion of the fees for their services in payments which are said to be loans. HMRC is clear that these arrangements do not succeed in avoiding tax.
Individuals using these schemes may already have received letters opening enquiries into their recent returns, and over the coming months HMRC will be sending tax assessments to those who have used these schemes between 2008 and 2011.
Taxpayers that receive an assessment will have the option of either accepting the assessment and paying the tax due or appealing against the assessments. Any of our readers who receive a communication from HMRC in relation to this announcement are advised to contact us as soon as possible.