HMRC has issued a warning to 16,000 contractors to declare their involvement in an ‘aggressive’ offshore tax avoidance scheme.
The contractors involved will have until January next year to approach HMRC and pay the tax due, or they will risk being liable to pay penalties and even legal fees on top of the owed taxes.
It is estimated each of the subscribers to the EBT loan scheme on average owes £11,000 in taxes. In total the offshore scheme allowed participants to collectively avoid taxes amounting to £176 million a year.
HMRC has stated that these individuals will be given the opportunity to settle owed sums up until the 2011 tax year, being able to pay the tax and interest received as part of the loan scheme. The involved parties have six months to come forward.
A HMRC spokesperson said: “HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users.”
Earlier this month, PCG issued a warning to contractors to steer clear of getting involved in any tax avoidance schemes, acknowledging that the vast majority of contractors and self-employed professionals adhere to compliance rules.
Commenting on HMRC’s EBT warning, PCG’s Senior Public Affairs Manager, Andy Chamberlain, said: “The tax system simply isn’t coping with this burgeoning sector (self-employed) of the labour market. It is too complex and it is this lack of clarity which leads to the proliferation of schemes such as the ones HMRC are targeting today. If the Government are serious about clamping down on avoidance it must, as a matter of urgency, undertake a route and branch review of how tax is collected in this country.”