Contractors working through their own companies from 2000 onwards may have been told by their employment agency that it was tax efficient to accept payment for their services structured as a loan. Some employees were also provided with loans in place of part or all of their salary where their employer used an Employee Benefit Trust (EBT).
As a contractor did you have a loan scheme?
HMRC now believes that as these loans were never meant to be repaid, they were in fact disguised remuneration for the employee or contractor. HMRC is demanding that the taxpayers who received the loans should pay tax and national insurance (NI) on the gross amount received, even if that was years ago.
The amount of tax owing on the loans is often so large that the taxpayer cannot hope to raise the amount due in one go. HMRC realises this and so will allow taxpayers to settle the total tax and NI due over five years. However, this spreading of the liability is generally only permitted if the taxpayer’s income for 2018-19 is expected to be less than £50,000.
Taxpayers with higher income can negotiate a shorter or longer instalment plan on an individual basis. Interest will be charged on all late paid tax at the standard HMRC rate of 3.25%.
If you were caught up in a loan scheme you need to contact HMRC before 30 September 2018 and negotiate how to settle any outstanding tax due.
Would you like help and advice on this or any other issue?
Contact us straight away by telephoning 01932 564098 or email us using our ‘Contact Us’ page.
This note was published from our Autumn 2018 Newsletter dated September 2018
Please be aware that the information above may have changed in subsequent months.
This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.