Advisory firm Moore Stephens has advised flexible workers who previously used ‘contractor loan’ tax planning schemes to finalise settlements with the tax authority by the middle of next week or risk significantly higher bills to regularise their position in the future.
HMRC said the practice of securing loan arrangements for contracts of employment via offshore companies was now deemed ‘particularly aggressive’; however, it has given contractors involved in these schemes the chance to settle by paying tax and interest by 30th September.
Around 16,000 contractors in the UK are believed to have used this type of arrangement, which saw them paid for their work via a non-taxable loan. HMRC’s Contractor Loan Settlement Opportunity was originally planned to close in January; however, the deadline was extended to June before being extended again to September.
The majority of contractors involved in the contractor loan schemes worked in the banking, oil & gas and IT sectors prior to April 2011 and earned between £60,000 and £80,000 each year. They still have the chance to finalise settlements by paying interest and tax on the value of the loan without any additional penalties or NI contributions.
Moore Stephens head of tax investigations and disputes, Dominic Arnold, claims the vast majority of contractors involved did not fully appreciate the risk of such schemes when they entered into them and urged those involved to give “strong consideration” to the settlement opportunity.
He added: “HMRC has been taking a balanced approach, and taking into account reasonable requests for payment arrangements, which makes settlement worth investigating for those with exposure to contractor loan schemes.”