September 30 'final deadline' after settlement opportunity extended
Contractors who used 'contractor loan' tax planning schemes have until September 30 to finalise settlements with HMRC or risk significantly larger bills to regularise their tax positions, warns Moore Stephens, the Top Ten accountancy firm.
HMRC has said that it regards contractor loan arrangements, under which contractors signed contracts of employment with offshore companies and were paid for their work under UK contracts in the form of a non-taxable loan, as being 'particularly aggressive'. An estimated 16,000 contractors are believed to be involved in such arrangements.
Moore Stephens says that the tax authority's Contractor Loan Settlement Opportunity has already been extended twice owing to the number of contractors wishing to take advantage of what are relatively generous terms on offer. The opportunity was previously scheduled to close in January 2015, then again in June.
It says that for contractors involved in loan schemes prior to April 2011, HMRC is currently offering the opportunity to settle by paying tax and interest on the value of the loans, without having to pay National Insurance contributions or penalties. HMRC may also consider waiving tax for years where it has failed to take appropriate action.
Moore Stephens adds that the majority of the contractors involved in the schemes are middle-income workers in the IT, oil & gas and banking sectors, with an average income between £60,000 and £80,000 per year.
Dominic Arnold, Head of Tax Investigations and Disputes at Moore Stephens, says:
"This is certainly a settlement opportunity worth strong consideration – a contractor who decides to settle individually later is unlikely to be able to get the same terms.
"This settlement opportunity certainly seems to have been very heavily subscribed, as the closing date has already been pushed back twice due to the backlog of cases. The feeling is, however, that this really is the final deadline.
"While this opportunity is only for contractors who used these loan schemes prior to 2011, we would advise anyone who has used them since that date to consider approaching HMRC through their accountants. 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.
"The vast majority of those involved in contractor loans did not fully appreciate the risk they were taking when they were sold the schemes – it seems HMRC is taking that into account with the terms on offer."