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Tax Planning

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Contractors who are working in the UK, and earning higher levels of income, may be interested in exploring the potential opportunities available from Tax Planning solutions.

With all Tax Planning solutions you should be aware that there is always an element of risk involved and as such; you should make sure that you fully understand the scheme and any risks before you sign up.
 
HMRC scrutinise Tax Planning schemes, therefore it is vitally important that the scheme is run correctly. The ultimate risk to a Contractor using one of these schemes is that all of the tax ‘saved’ will become payable along with penalties, should HMRC deem the scheme not to work. It may therefore be a sensible idea, to put aside the amount of tax that has been saved, in case any future problems materialise with the scheme.

It is our understanding, that HMRC never approve or endorse a Tax Planning scheme. There are specific disclosure provisions that the creators / promoters of a scheme have to adhere to under the Disclosure of Tax Avoidance Schemes (“DOTAS”) regulations. The issuance of a DOTAS reference number by HMRC, for inclusion on the tax return of a Contractor using such a scheme, is only to help HMRC identify the particular scheme that is being utilised, it does not mean approval of any particular scheme.

Contractors interested in using one of these schemes, should ensure that the scheme is backed with robust opinion from senior Tax Counsel. You should make sure that the opinion is up-to date and confirms that the scheme is compliant with current UK Tax Legislation.

Tax Legislation can change, and a scheme that is compliant this year may not be in the future, so we recommend that if you choose this route, you review your position on a regular basis. Ask the scheme provider what contingency plans they have in the event the scheme is restricted by a change in the legislation or if the position is challenged by HMRC. Some providers set aside funds to contest any claims by HMRC, others provide restricted guarantees in respect of how and to what level they will defend their scheme.

You can also seek professional advice from an accountant or tax advisor prior to signing up to a scheme, should you require further comfort.

Contractor Friend is neutral in respect to its position on tax planning schemes; it does not endorse or oppose any specific scheme. We believe it is up to each contractor to assess the risks and make an informed decision based on their individual circumstances and risk appetite.

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