Contractor loan tax avoidance schemes
Have you taken part in a contractor loan scheme? This is a tax-saving scheme which was widely sold to workers in personal service industries, such as IT contractors.
To use the scheme the individual would sign an employment contract with an offshore employer, but work for customers in the UK. The individual would often receive a large proportion of their fee for that work as a loan from the offshore employer. They were told the loan was not taxable, except for a small benefit-in-kind charge on the unpaid interest on the loan, but that’s not what the taxman thinks. At least one contractor (Mr Boyle) has lost his case in the courts trying to defend his use of a contractor loan scheme which was run through an offshore company.
The taxman is now opening enquires into individuals' tax returns for periods during which they have used such loan schemes. In some cases the individual will receive a tax bill for the years 2008/09 to 2010/11, to claw back the tax they think they saved. In all cases, it seems likely that HMRC will seek to charge penalties and interest in addition to the avoided tax.
If you have used a loan scheme similar to Mr Boyle’s to save UK tax, we need to talk.