HMRC urges contractors and freelancers to settle tax bills

Contractors and freelancers only have until the end of June to register for the Contractor Loans Settlement Opportunity (CLSO), HM Revenue and Customs (HMRC) warned today.

Contractor Loans schemes were promoted on the basis that they allowed contractors and freelancers to convert fees for working in the UK into a loan to avoid tax. However, following litigation against one of these schemes, the Courts decided that the scheme didn’t work and that these loans were taxable.

Launched in July 2014, the Settlement Opportunity gives those who used Contractor Loans Schemes before April 2011 the opportunity to resolve their tax dispute without the expense, delay and worry of potential litigation. HMRC will be looking to collect the tax and interest from all users of the scheme. If contractors using these schemes fail to come forward and take up the opportunity, they risk having to pay additional tax charges and penalties, as well as potential litigation costs should their case reach the Tax Tribunal.

Jennie Granger, HMRC’s Director-General for Enforcement and Compliance said:

“Contractor Loans are a form of tax avoidance that do not work and are unacceptable – it’s not fair that the majority of us pay what we should, including contractors to fund public services that we all use but others don’t. HMRC remains relentless in its work to tackle avoidance and will continue to use its full range of powers to this end. The CLSO gives this group a chance to put their affairs in order by paying the tax they owe and put avoidance behind them.”

“I urge anyone who has used Contractor Loans to contact HMRC. Not only will you have peace of mind as you’ll have certainty about what you need to pay, but it will save you going to Court.”

Customers can register via a dedicated helpline on 03000 534226 or email:

cl.resolution@hmrc.gsi.gov.uk

Customers who tell HMRC that they want to come forward under these terms by 30 June will need to settle by 30 September 2015.

Notes to Editors

1. Contractor Loans schemes are complex arrangements which involve individuals signing a contract of employment with an offshore employer. They then receive their remuneration from contracts in the UK through an offshore company or trust in what are claimed to be non-taxable loans, rather than as income. These are particularly aggressive schemes, used by the 1% of contractors who really do not want to pay their fair share.
2. The Settlement Opportunity opened in July 2014. In response to customer requests for more information, we published further guidance and clarification in December 2014, giving customers until June 2015 to register.
3. This Settlement Opportunity applies to schemes used before the Disguised Remuneration rules were introduced in April 2011.Around 16,000 users can use the opportunity. However, HMRC will discuss settlement of all scheme use with anyone who comes forward during the settlement opportunity period.
4. Settlement Opportunities are one of a number of tools HMRC uses for tackling tax avoidance. These also include the new Accelerated Payments powers introduced as part of the Finance Act 2014.Under these powers, HMRC is able to seek upfront payments of disputed tax from members of avoidance schemes.
5. Ten things you need to know about the CLSO can be found here.
6. More information on what HMRC is doing to tackle tax avoidance is available at      https://www.gov.uk/government/policies/reducing-tax-evasion-and-avoidance
7. Follow HMRC Press Office on Twitter @HMRCpressoffice
8. HMRC's Flickr channel: www.flickr.com/hmrcgovuk