HMRC close in on contractor loan scheme

Stanzar Solutions are to receive HMRC Interest after Revenue probe into offshore loan schemes.

HMRC have set their sights on a new group of contractors who freelanced in the UK via offshore means, handing them UK income tax assessments over the coming months.

As stated on their website, HMRC made comments regarding contractor loan schemes, confirming that are ‘challenging arrangements’ made between the contractor and the employer: “HM Revenue & Customs (HMRC) is challenging arrangements 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.”

The HMRC letters shall be reaching the contractors in question over the next few months, the HMRC website confirming, with recipients being told:

“The [assessed] sum arose from tax avoidance arrangements you entered into with The Sanzar Solutions IOM Partnership, a company sited outside of the UK. Although described as loans, [HMRC] believe that these sums related to your professional work in the UK and are taxable income, either as such or under long-stand standing anti-avoidance rules.”

Whoever is on the receiving end on the Revenue’s letters have the choice to either accepting to pay the tax following an assessment, or indeed launch an appeal.

Tax advisor Andy Vessey commented:

“Although HMRC does not actually provide any justification for their decision in their letters…should a contractor’s appeal be unsuccessful, and that tax found to be payable, a surcharge of 5% will be levied”.

“An additional 5% surcharge is imposed where the tax remains unpaid effectively seven months after the date of the assessment. This is on top of the interest charged on late paid tax.”

HMRC are amidst a substantial ‘crackdown’ against tax avoidance, their efforts of late being increased when tackling contractors and limited company professionals. This recent enforcement against contractor ‘loan schemes’ is another example of the taxman taking a keen interest into the working practise of the nation’s growing temporary workforce.