Thousands of workers hit with huge tax avoidance bills

 The 2019 loan charge means that contractors whose employers paid them through loans from offshore trusts facing massive tax bills from HMRC. 


Up to 50,000 self-employed workers in the UK are believed to have benefitted from the lower income tax rates applied under loan advances, instead of being paid salaries.


Those yet to have settled outstanding loans dating back to when the schemes first arose in 1999 could be facing a hefty tax bill.


Contractors were paid using loans rather than salaries, which sidestepped the usual income tax and national insurance contributions.


The schemes were hugely complex. Contractors were advised to use an employee benefit trust (EBT), usually set up by a specialist company. The agreed payment would be paid to the EBT which will then pay the payment back to the contractor in the form of a loan, after the idea that the loan will never be repaid. HMRC calls it a ‘disguised remuneration’.


HMRC has already contacted 40,000 people with loan charge demands, and in total it expects to pull in an extraordinary £3.2bn in tax.


From 5 April 2019, HMRC will begin to apply a tax charge on outstanding balances on any such loans made since 6 April 1999. HMRC has also confirmed that payment arrangements are available for those who would struggle to pay back what’s owed.




Blog post uploaded 11 March 2019