In September 2013 HMRC announced that ‘offshore loan schemes’ are to be actively challenged. More recently in December 2013 HMRC then stated that it was to place such schemes in its ‘Spotlight’ i.e. in effect making a conscious effort to ‘warn’ taxpayers about their concerns in this area.
This move is mainly targeted at smaller self-employed or limited company contractors who (intentionally) operate via these avoidance arrangements. The schemes usually involve entering into a contract of employment with an offshore employer and receiving a substantial proportion of the payment for ones services in ‘loans’. Unsurprisingly (as the services are invariably performed in the UK) HMRC contests whether the schemes work.
HMRC alludes to a recent Tribunal case which was ‘comprehensively and robustly’ decided in HMRC’s favour, and concludes that contractors should now voluntarily opt to settle the PAYE duties that it considers due. Following the usual ‘carrot or stick’ approach, HMRC has also said that participants can otherwise expect to be notified that their returns are under enquiry and/or receive assessments for what HMRC sees as unpaid duties. Voluntary settlement would of course potentially mitigate any penalties chargeable.
The initiative is in addition to HMRC’s proposed tightening of the rules in relation to ‘Overseas Employment Intermediaries’ (some of whom engage large numbers of relatively low paid workers, under offshore NIC avoidance arrangements, without even telling the workers they are doing so) and does appear to be part of a concerted move to target ‘offshore avoidance’.
If you require further details please contact the ET4B team.