Contractor Loan Tax Avoidance Schemes
Contractor loan schemes are considered by HMRC to be Tax Avoidance Schemes 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.
Further to this, if the Contractor Loan Scheme is not disclosed and is in place as at 5 April 2019, a loan charge may be sought unless disclosure of this scheme is made before 31 December 2018 (as of writing).
At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, including Accelerated Payment Notices, Personal Liability Notices, VAT Security or any other claim - including appeals to Tax Tribunals or insolvency claims by Liquidators and defending Director Disqualification Claims.
Please call any member of our Tax Disputes team for your consultation now on 020 7841 0390. Alternatively email us with your enquiry at firstname.lastname@example.org and we will call you back at a time convenient to you.