Contractor loan schemes

If it sounds too good to be true it normally is! George Osborne announced in the Summer Budget there would be more funds available to HMRC to counter tax avoidance schemes (high profile cases such as Jimmy Carr and Chris Moyles have brought this into the public eye more and more).

Contractors using offshore loan schemes are next on the hit list with HMRC saying:

“HM Revenue and Customs (HMRC) view is that these schemes don’t work and strongly advises any contractor or freelancer who has used such a scheme to withdraw and settle their tax affairs.”

This does not come as much of a surprise to us having dealt with a number of tax investigations for new contractors coming to us having used these schemes and now coming under scrutiny from HMRC.  In a lot of the cases the scheme provider has sailed off into the sunset and the contractor is left to defend a scheme they don’t understand on their own.

Among HMRCs other new powers is the ability to send out Accelerated Payment Notices (APNs), asking for the upfront settlement of tax before due and whilst in dispute.  This has been used by HMRC in a number of tax avoidance scheme investigations so far.

Clients of SG Accounting will have nothing to fear as a result of these changes, we believe in doing things right.  After all, there is enough you can do to save tax legitimately.  In one example recently a potential client came to us to compare the tax home pay percentage offered by a contractor loan scheme compared to the limited company solution.  The contractor was quite surprised when we explained that the tax home pay would be 5% better through a genuine limited company set up rather than the off shore loan scheme….and the difference would go to HMRC as tax rather than to the loan scheme provider!