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The HMRC information service on tax avoidance arrangements, Spotlights, has added an update on contractor loan schemes in light of the First-tier Tribunal decision in P Boyle (TC3103).
The tribunal dismissed all the arguments put forward by an IT contractor that his contractor loan scheme worked and the money he received was not subject to tax. The judge decided that the money paid over to the taxpayer as loans was “in substance and reality income from his employment” and therefore taxable.
The HMRC information service on tax avoidance arrangements, Spotlights, has added an update on contractor loan schemes in light of the First-tier Tribunal decision in P Boyle (TC3103).
The tribunal dismissed all the arguments put forward by an IT contractor that his contractor loan scheme worked and the money he received was not subject to tax. The judge decided that the money paid over to the taxpayer as loans was “in substance and reality income from his employment” and therefore taxable.
Avoidance scheme promoters sold contractor loan arrangements with a variety of different features, but they all involved individuals signing an employment contract with an offshore company and receiving a large proportion of income in the form of a loan from their employer, either directly or through an intermediary, according to the Revenue.
The department accounced in September that is was challenging the schemes. Many taxpayers have received tax assessments or letters opening enquiries, and the department is continuing to issue more and to pursue outstanding tax.
Many contractors who used loan set-ups have already agreed to pay tax and interest on the money they received, said HMRC, while others were waiting for the Boyle decision before deciding whether or not to contact the taxman.
