As a contractor, you’ve probably been the victim of companies guaranteeing you over 90% take home pay.
This all kick started several years ago by the use of contractor loan schemes. Promoters of this scheme reduce the amount of tax a contractor has to pay on their income by redirecting income through several different companies, trusts or partnerships and then pays the individual in the form of a loan. Loans can be claimed as untaxable as they are not included as part of the contractors income. Due to this being the contractor’s income, the ‘loan’ isn’t actually repaid.
HMRC are aware of this scheme and are keen to ensure it is not a success. Furthermore, they strongly stated that using this could land contractors in difficulty and strongly advised contractors and freelancers to avoid these to prevent facing substantial penalties and interest charges being incurred due to tax affairs. They also recommended that anyone who believes they are using one of these schemes should withdraw from these and settle their affairs.
HMRC has confirmed this type of scheme must be declared under the Disclosure of Tax Avoidance Scheme legislation. This means the promoter of this scheme provide the Scheme Reference Number to each individual who must then provide this on their tax return.
Here at Gorilla Accounting, we will answer any queries you may have about potential contractor loan schemes under our client service guarantee. This is included in our all-inclusive accountancy package for just £85 + VAT. To know more, get in touch on 0330 024 0406.