HomeFWJ TakeawayResourcesContractor loan tax avoidance schemes

Contractor loan schemes are considered by HMRC to be tax avoidance schemes.

  • they are promoted by tax advisers as a method to avoid tax on income payable by the employer company by loaning money to the contractor, often through a chain of trusts, which is never repaid;
  • on this basis the “loan” is actually income and must be declared to HMRC on your tax return.

Contractor loan schemes work in a similar fashion to Employee Benefit Trusts and are therefore, in the eyes of HMRC, disguised remuneration. On the basis that the scheme seeks to disguise remuneration as a non-taxable vehicle, which it is not, then when discovered the tax income lost can be subject to penalties of up to 100%, interest at 8% per annum and surcharges.

Accordingly, an attempt to save 25-45% of income via this tax scheme may lead to a 50-90% charge to HMRC.


At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, including loan schemes, accelerated payment notices, personal liability notices, VAT security or any other tax disputes claim.

Contact us in confidence