.png)
.png)
HMRC have launched a challenge to arrangements used by contractors and other professionals to mitigate tax by entering into a contract of employment with an offshore employer while providing their services in the UK.
Participants receive a substantial proportion of the fees for their services in payments said to be loans. The Revenue does not agree that the arrangements succeed in avoiding tax.
HMRC have launched a challenge to arrangements used by contractors and other professionals to mitigate tax by entering into a contract of employment with an offshore employer while providing their services in the UK.
Participants receive a substantial proportion of the fees for their services in payments said to be loans. The Revenue does not agree that the arrangements succeed in avoiding tax.
Individuals using such contractor loan schemes may have already received letters opening enquiries into their recent returns. The taxman plans to send assessments to taxpayers who have used the schemes between 2008 and 2011.
Recipients will have the choice of either paying the tax due or appealing against the assessments, beginning the process to have the case heard by a tax tribunal if agreement cannot be reached with HMRC, who published the consultation Offshore Employment Intermediaries in the summer, to review a proposal for income tax and National Insurance charges.
Taxpayers and advisers wishing to discuss tax assessed are invited by the department to contact it by email via its website.
The taxman’s approach is confusing, said Nicola Stone, a senior manager at EDF Tax. “If HMRC consider the loans as income, then surely the department should be approaching the employer for failing to operate PAYE correctly rather than pursuing each individual employee,” she said.
Stone recommended that taxpayers who believe they may be affected by the Revenue’s challenge should ensure their income and benefits from employment have been reported correctly. “If they have, the onus is on HMRC to prove the individual, rather than the employer, has done something wrong,” she said.
“For some employees, an assessment may already be out of time, which will prevent the proposed action unless HMRC can establish that the taxpayer, or someone acting on his or her behalf, was careless in relation to the alleged loss of tax.”
