Under the contractor loans scheme agency or temporary employees are paid in the form of a loan from a trust or company, sometimes referred to as a remuneration trust. The companies that promote these schemes argue that the payment is non-taxable because it is a loan, and does not count as income. However HMRC’s view is that these loans are taxable like any other normal income as the individual does not pay the loan back.
HMRC is clear that it will mount a challenge to anyone found to be using these tyre of schemes and will issue accelerated payment notices to individuals meaning the disputed tax will have to paid to HMRC upfront whilst HMRC investigates the exact circumstances. According to HMRC, they have an 80% success rate on avoidance schemes that end up in court.
The following are common signs that a scheme may be too good to be true:
- You’re told you can take home 80% to 90% of your income
- You’re told you don’t have to declare the scheme
- You’re told the scheme is HMRC approved
We would advise of our readers who are using these types of schemes to contact us for a thorough review. If the scheme is unworkable we will help deal with HMRC on your behalf to ensure that any interest and penalties due are minimised.