Settlement opportunity: tax on contractor loans. HMRC gave contractors who entered contractor loan schemes tax avoidance arrangements an opportunity to pay their tax and avoid penalties. This closed on 30 June 2015.
Contractor loans were spotlighted by HMRC as part of its anti-avoidance measures back in September 2013 following its successful litigation using the Transfer of Assets abroad legislation in Philip Boyle v HMRC.
The tax planning in the contractor loan schemes involved contracting via a non-UK employers who then paid a basic salary toping up remuneration with a loan. There are different types of loan scheme, in the Boyle type scheme it was argued that no tax was due on the basis the loan was a genuine loan (this was claimed by Rangers in its EBT case but the Court of Session and Supreme Court disagreed) however as the contractor schemes involve offshore entities they are caught by the transfer of assets abroad provisions instead.
Contractors were being given until 9 January 2015 to take up the scheme, the deadline for notifying HMRC was extended in January 2015 to 30 June 2015. The settlement must be agreed with HMRC by 30 September 2015.
HMRC now has powers under the Accelerated Payment and Follower Notice provisions to demand payment or adjustment to tax claims (which may well lead to a liability) from anyone with a Boyle type scheme or any of the EBT type schemes still under dispute. Contractors and other taxpayers who have used these schemes may want to consider how to settle.
See Disguised remuneration final settlement opportunity for details on how to reach a settlement on contractor loan schemes now.