HMRC Targets Contractors and Freelancers

HMRC has begun to actively target contractors and freelancers over potential tax avoidance and unpaid tax.

Contactors and freelancers who worked in the IT, banking, oil and gas industries in the 2000s are reported to be the subject of focus. They are now facing demands from HMRC to repay tax that they might have avoided paying a number of years ago whilst undertaking contract work. It has been reported that HMRC has already issued Accelerated Payment Notices (APNs) demanding that the disputed tax amount is repaid in full within 90 days.

Contractors who entered into Employee Benefit Trust Scheme or Contractor Loan Agreement that were offered by large companies have now fallen onto HMRC’s radar. The scheme offered contractors an alternative to setting up a limited company through which they could pay themselves (also known as personal service companies), and avoid the administrative burden of running a company.

Employee Benefit Trust Schemes, or Contractor Loan Agreements, have been considered as aggressive tax avoidance schemes by HMRC. As such, the schemes are some of the 1,200 included on HMRC’s DOTAS (Disclosure of Tax Avoidance Scheme) list.

Accelerated Payment Notices were introduced as a method of targeting wealthy investors who used tax avoidance schemes that HMRC considered as being aggressive.

Now HMRC will be issuing APNs to individual contractors who have used an Employee Benefit Trust Scheme / Contractor Loan Agreement. It is estimated that over 22,000 contractors and freelancers were targeted by companies offering the scheme, and so HMRC is looking to tighten the net on those it suspects of tax avoidance.

The reality for many contractors and freelancers is that it is unlikely that they will be able to pay the full amount of disputed tax within 90 days as demanded by HMRC in the APN.

HMRC has offered the Contractor Loan Settlement Opportunity in order to settle any outstanding tax liabilities, and to avoid potential penalties and interest on top of the unpaid tax.

If you were a contractor in the 2000s and entered into an Employee Benefit Trust Scheme / Contractor Loan Agreement you can discuss your circumstances with an experienced member of our tax investigations team.

For more information and to discuss your circumstances in complete confidence call us on 0113 387 5670 or fill out an Enquiry Form and we will get back to you straight away.