HMRC has given 16,000 offshore loan scheme users the opportunity to pay the tax they owe or risk facing bigger tax bills and legal costs.
The Revenue said that on average, each of the users of the contractor loan schemes covered by this settlement opportunity owes £11,000 a year in tax. The total amount of tax owed by these users is £430m.
The schemes, which are used by a minority of contractors (used by just 1% of contractors) and are “particularly aggressive”, involve complex arrangements with individuals signing a contract of employment with an offshore employer, HMRC said.
They then receive their pay from contracts in the UK through an offshore company or trust in what are claimed to be non-taxable loans, rather than as income.
Users will have until January 2015 to take up the settlement opportunity, which applies to schemes used before the Disguised Remuneration rules were introduced in April 2011.
HMRC said if they do they will pay the tax and interest due on the sums they received as loans under the scheme. But if they continue to challenge the Revenue in the courts, they risk having to pay additional tax charges and penalties, as well as the costs of litigation if they lose.
Jennie Granger, HMRC director general for enforcement and compliance, said: “Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.
“This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they've understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. 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,” she said.
HMRC offers settlement opportunities like this for some types of marketed tax avoidance schemes that have large numbers of users and where there is a range of possible outcomes in law.
They are one of a number of tools HMRC uses for tackling tax avoidance, whichinclude the new accelerated payments powers introduced this month as part of the Finance Act 2014.
The introduction of accelerated payments means HMRC will now be able to make taxpayers pay disputed tax in advance rather than waiting for the outcome of a tribunal ruling.
The Revenue will also be able to issue follower notices for cases of tax avoidance that resemble others where principles were previously established, and taxpayers will be required to pay in advance of an agreed final position.