UK contractors have been warned to steer clear of loan schemes using offshore trusts that promise to reduce their income tax bill.

Workers paid through these contested structures before 2011 had until the end of September to resolve disputes worth £430 million with HM Revenue & Customs (HMRC), and now face the threat of steeper charges and upfront payment demands.

HMRC has estimated that about 16,000 contractors – predominantly in IT, banking, and offshore oil and gas – have taken part in the schemes where employment income is generally routed through offshore trusts and paid in the form of non-taxable loans.

HMRC has warned that contract workers targeted by scheme promoters “should think again” before signing up, and added contractor loan schemes to its public “spotlights” list of structures that it believes amount to tax avoidance.

Arrangements that have featured on this list, including employee benefit trusts and schemes using the business premises renovation allowance, have been the target of the Government’s recent crackdown on tax avoidance.

Recently, HMRC confirmed that £1 billion had been collected from taxpayers involved in disputed structures using accelerated payment notices. By the end of 2016, HMRC expects to have issued 64,000 notices, bringing forward £5.5 billion in payments for the Exchequer by March 2020.

Link: HMRC crackdown

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