Contractor loan scheme scuppered at tribunal

THE FIRST-TIER TRIBUNAL has dismissed a tax avoidance scheme whereby an IT contractor was paid in the form of loans from an offshore company.

In terms of structure, the scheme is similar to the one infamously used by comedian Jimmy Carr in 2012.

Philip Boyle, the IT contractor in question, argued that his contractor loan tax avoidance scheme worked and the money he received was not taxable. He added that if he had received income from his employment, it should have been taxed under PAYE by the offshore company and that he should not have to pay, something the judge dismissed.

The judge also decided that even if the money Boyle received under the scheme was not income from employment, he would still have to pay due to rules pertaining to the transfer of assets abroad.

In an update to its tax avoidance Spotlights page, HMRC said promoters sold contractor loan schemes with a variety of different features but they all “involved individuals signing an employment contract with an offshore company and receiving a large proportion of their income in the form of a ‘loan’ from their employer – either directly or through an intermediary”.

MHA MacIntyre Hudson tax partner Alastair Kendrick said: “Clearly HMRC are aware that there are still a substantial number of workers who had taken advantage of what they thought was a tax loop hole. They suggest many have settled.

“I am not aware whether this is indeed the case because in my view many had been told the scheme was robust and they are being encouraged to join fighting funds to challenge. It is true to say that for those wanting to settle it does seem from my experience that HMRC are prepared to agree favourable deals and it is uncertain for how long these deals will continue. Those resisting may be faced with a different attitude by HMRC.”