HMRC warns 16,000 contractors over offshore loan scheme
29th July 2014 | News
More than 16,000 individuals have been given six months by HM Revenue and Customs (HMRC) to come forward or risk paying more, having previously used an offshore scheme that avoided £176m a year in tax.
HMRC has targeted contractors with a settlement opportunity, which will be open until January 2015, to users of the loan scheme – each of whom has an average annual tax bill of £11,000.
Those who fail to come forward and continue to challenge the tax liability risk being charged with additional tax charges and penalties by HMRC – as well as the costs of litigation should they lose.
Contractors which take the option of using the settlement opportunity – applicable to the tax years up to 5th April 2011 – are able to settle up on the “best possible terms”.
This means they will only pay the tax and interest due on the sums they received as loans under the “particularly aggressive” scheme, used by around one per cent of the UK’s contractor population.
The contractors had signed a contract of employment with an offshore employer, which then paid them for their work on UK contracts via an offshore company or trust, in the form of non-taxable loans, rather than income.
The tax authority addressed UK contractors and employers who have used such loan schemes and explained the importance of complying with their settlement opportunity.
“They can choose to continue to litigate for a better outcome but they risk a worse result,” said an HMRC spokesperson.
“HMRC has a strong track record of winning tax avoidance cases in court, with around 80 per cent of decisions in our favour.
“The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users.”