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BN66 / Section 58 / Contractor Offshore Schemes

Thousands of contractors used offshore tax schemes in the years before (Section 58) the Finance Act of 2008 stated that (bn66.pdf) "UK residents are taxable on their income wherever it arises" following the Government's announcement that they were to crack down Double Taxation Treaty 'Abuse' by UK residents. The legislation's objectives were to:

  • clarify, retrospectively, legislation introduced in 1987, which itself was retrospective, so that it has effect as intended. This will ensure that, notwithstanding the wording of any double taxation treaty, UK residents pay UK tax on their profits from foreign partnerships; and
  • prevent tax avoidance through the misuse of Double Taxation Treaties by UK residents.

As a result a substantial number of contractors who have used schemes run out of the Isle of Man (and other locations) face crippling back taxes as HMRC can go back as far as 1987 and retrospectively apply tax legislation for those using offshore schemes as a way of avoiding paying UK taxes.

A High court ruling on the 28th January 2010 went against Robert Huitson, an IT contractor, who claimed that retrospective taxes on income received before 2008 Finance Act became law were in breach of the European Convention of Human Rights.

Mr Justice Kenneth Parker disagreed however, which means that contractors using such schemes in the past face being pursued for backdated tax, interest, and penalties.

The articles below detail our coverage of both the legislation and how this has affected IT contractors. You can also visit our forum to talk to contractors affected.

BN66 Comment

Retrospection in effect, says CIOT, warning that new tax powers from April go too far.

Template for contractors who want to head off potential injustices from HMRC.

BN66 campaign boss on the tactical fight against lethal Section 58(4).

Dear Mr Tory chancellor, amend Labour’s tax rule so it only applies prospectively. 

Point-by-point rebuttal of David Gauke’s remarks on retrospective tax rule S58.

Thousands of IT contractors are forced a step closer to paying £100million in backdated income tax.

Monday is judgement day, of sorts, for how three senior judges view retrospective taxation.

Whether Section 58 infringed IT contractors' human rights is under consideration.

"No commercial purpose" puts BN66 contractors in the Revenue's hands.

Judge dismisses claims that HMRC's retrospective tax take was unlawful.

Judge mulls the retrospective tax net that caught thousands of IT contractors.

Government told Section 58 has adversely affected human rights.

No repeal in sight, just more measures to thwart offshore tax planning.

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