Tackling tax avoidance: Spotlights
02 January 2014
'Spotlights' warns you about certain tax avoidance schemes which HMRC thinks you should be aware of. These are just some of the schemes which HMRC believes are being widely offered to help those using them to avoid tax. HMRC is currently improving Spotlights to add more schemes.
You should be wary of other types of schemes, not just those listed here. If you are offered a way to pay less tax that sounds too good to be true, it probably is and be aware, HMRC never approves any scheme.
You are responsible for making sure that your tax return is correct - so make sure you understand what you are signing up to. If you do use an avoidance scheme you will be subjected to an HMRC enquiry.
If you want to report a scheme that you believe has been set up to avoid tax, you should let HMRC know.
Update on Contractor Loan tax avoidance schemes
The First-tier Tribunal comprehensively and robustly dismissed all the arguments put forward by an IT contractor to persuade them that his contractor loan tax avoidance scheme worked and the money he received was not taxable. In Philip Boyle v HMRC the tax tribunal judge decided that the money paid over to Mr Boyle as loans was 'in substance and reality income from his employment' and therefore taxable.
This tax tribunal decision means that the contractor has to pay tax on the loans.
Mr Boyle argued that if he had received income from his employment, it should have been taxed under PAYE by the offshore company and that he should not have to pay. The judge dismissed that argument as well. She also decided that even if the money Mr Boyle received under the scheme was not income from employment, he would still have to pay tax as a result of specific rules to prevent tax avoidance known as the 'Transfer of Assets Abroad' rules.
Tax avoidance scheme promoters sold contractor loan schemes with a variety of different features but they all involved individuals signing an employment contract with an offshore company and receiving a large proportion of their income in the form of a 'loan' from their employer - either directly or through an intermediary. In September 2013 we said that we were challenging these schemes. Many people have received tax assessments, or letters opening enquiries, and we are continuing to issue more and to pursue the tax which should be paid.
Many contractors who used these schemes have already agreed to pay tax and interest on the money they received. Others have been waiting for this decision before deciding what to do. If you are one of those people who waited for the decision we would encourage you to come forward now to resolve your tax position. You can contact us by email, or by writing or calling the contact shown on the assessments or enquiry notices you have received.