Freelancers from the UK’s professional contracting community who have used a contractor loans scheme identified by HMRC as a “particularly aggressive” form of tax avoidance are to be given a chance to repay the tax they owe or risk heftier tax bills and severe legal costs.

The Revenue estimates that around 16,000 contractors have used the scheme ‒ representing just 1% of the contracting community, according to the PCG ‒ and between them owe £430m. They are to be given until January next year to fully settle their tax accounts with the Revenue, including interest and any additional fines and penalties incurred.

Conceding that the government was right to investigate any schemes suspected of contravening the law, the PCG’s senior affairs manager, Andy Chamberlain, singled out the UK tax system for particular criticism. He said: “The tax system simply isn’t coping with this burgeoning sector of the labour market. It is too complex and it is this lack of clarity which leads to the proliferation of schemes such as the ones HMRC are targeting today. If the government are serious about clamping down on avoidance it must, as a matter of urgency, undertake a route and branch review of how tax is collected in this country.”

One ready solution for those who wish to benefit from the higher pay rates and improved work-life balance offered by contracting is, of course, to work as Umbrella Company Employees, safe in the knowledge that all due tax and NICs will be automatically deducted on a PAYE basis.

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