Spotlight on Contractor Loan Schemes
Newsletter issue - October 2015.
According to recent guidance published by HMRC, contractors and freelancers have been bombarded by promoters who make claims that they can help individuals take home up to 90% of their income using a contractor loan scheme. Broadly, promoters have been using this type of scheme to reduce the amount of tax paid on income by making payments which purport to be 'loans' from a trust or a company. Normally, a contractor would receive the contract income directly and pay tax on it. These arrangements artificially divert the income through a chain of companies, trusts or partnerships and pay the contractor in the form of a 'loan'. The 'loans' are claimed to be non-taxable because they do not form part of a contractor's income. However, in reality the 'loans' are not repaid and the money is used by the contractor as if it were his or her income.
HMRC are adamant that these schemes do not work and are strongly advising contractors and freelancers to keep well away from them. Individuals who have been using the schemes are being encouraged to withdraw and settle their tax affairs as soon as possible to avoid substantial penalties and interest charges being incurred.
HMRC have confirmed that this type of scheme must be declared under the Disclosure of Tax Avoidance (DOTAS) legislation, which means that the promoter is required to pass the scheme reference number (SRN) to all the users who must declare it on their tax return.
HMRC have added a new module entitled Contractor loan schemes - too good to be true (Spotlight 26) to their Spotlight series, which covers various tax avoidance schemes that HMRC consider to have wide tax implications. The module, which can be found here https://www.gov.uk/government/publications/spotlight-26-contractor-loan-schemes-too-good-to-be-true/spotlight-26-contractor-loan-schemes-too-good-to-be-true, may be of interest to anyone using, or considering using, a contractor loan scheme.
BLOG POSTS
Posted on Mon, 3 Aug 2015
Posted on Mon, 3 Aug 2015
Posted on Wed, 29 Jul 2015
TWITTER
Tweets by @OWSupportLATEST TAX TIPS AND NEWS
It has been revealed that companies across the UK have paid £95.2 billion in Business taxes in the financial year just finished (23/24) - a rise...
Baroness Ros Altmann, a leading campaigner on pensions, has highlighted her fears after figures showing that the number of pensioners liable for tax...
Business owners need to be aware of a batch of new laws that have just taken effect covering employees' rights....
The saga over whether HMRC will axe its tax helpline continues to rumble on, with the latest comments suggesting it may still close after all....
Q: I've started a new job quite recently with a hybrid working arrangement. I work from home 3 or 4 days per week,...
5th Companies House fees are increasing due to the recent introduction of the ECCTA....