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Clampdown on offshore schemes

Contractors who use offshore schemes face a clampdown after HM Revenue & Customs were granted the right to recover tax retrospectively, a contractor services provider has warned.

A High Court ruling in favour of HMRC means it can now introduce anti-avoidance measures that apply tax retrospectively, said Giant Group.

Giant Group's managing director Matthew Brown explained: ‘This ruling sends a clear signal that if tax arrangements are blatantly artificial, they can be taxed retrospectively. Even if a tax scheme exploits a loophole in current law the risks of using it are still very real.’

He added: ‘If a tax scheme sounds too good to be true, it probably is.’ He warned contractors and recruiters against using offshore schemes.

There has been a reported increase in the number of offshore schemes since the introduction of the Managed Service Companies legislation in 2007, which made it more difficult for contractors to minimise their tax liabilities by using UK-based providers.

Mr Brown added: ‘Contractors could try to persuade HMRC to collect outstanding tax from scheme promoters, but this may not be possible, in which case recruitment agencies could also be in the firing line.’

23/03/10