HMRC's latest moves: decoded for IT contractors

A new Spotlight notice affecting EBTs; the aftermath of the Rangers ruling and the GAAR getting its very first outing. It’s been an extremely busy August for HMRC and even us tax experts, so let me decode it all for IT contractors so it computes, writes Graham Webber, director of tax dispute specialists WTT Consulting.

Rangers – at last

Our ‘BIG GROUP’ has been looking for resolution ever since it was formed and the decision of the Supreme Court[i] on July 5th was met, on the whole, with a sigh of relief by our members who were facing historic tax charges from HMRC.

Here, at last, was a judge who clearly saw through the honeyed words of promoters compounded by the confusion of HMRC and who could examine the facts and come to a sensible (and short) decision. The payment of salary to an employee is taxable and liability rests with the employer.

This was surely the end to HMRC’s claim that contractors were engaged in a premeditated attempt to avoid tax with the Transfer of Assets Abroad legislation at its heart? Surely now HMRC would turn their considerable resources to closing the multi-billion-pound ‘tax gap’?

Rangers and PAYE

Well, there has been no immediate reaction from HMRC to their victory in the above case -- the ‘Rangers case,’ or the ‘big tax case’ as it’s also known. But in the last week, we became aware that a HMRC webinar is proposed for September 22nd when a new “settlement proposal” will be unveiled.

While we should all hope that full account of the Rangers decision will be made, I fear that we will have a simple rehash of the existing proposals which lay the entirety of the tax bills with the individuals. We may see a claim that this is because PAYE can be transferred to employees. That will be contentious and will take the enquiry into a different channel but one that is not going to produce an acceptable answer, quickly.

This is frustratingly simple. All parties in the contracted arrangements -- end clients, agents, umbrellas, promoters and yes, contractors, benefited. Why then is recompense sought from only one of those parties?

Reasonable settlement Vs retrospection

In ignoring requests for reasonable settlement, HMRC continues to issue messages that we regard as confusing. For example, in an attempt to stop avoidance of their retrospective 2019 charge, we have a new statement from the Revenue indicating that “re-describing loans” to avoid a tax charge will not be effective[ii].

Indeed, we would agree and would warn all those contemplating using one of the many proposals to seek unbiased advice. It is however the highest irony that “re-describing loans” is exactly what HMRC has done in making their claim for historic tax!

It is not reasonable for HMRC to claim that contractors in the past “should have known” that schemes did not work as advertised when by their silence, they gave tacit licence to promoters to claim otherwise. That position is hypocritical as HMRC ‘should know now,’ we suggest, that their actions are driving a vital cog of our economy into bankruptcy and personal decline. Endless confusing statements while refusing to acknowledge a reasonable settlement proposal is not helpful.


Then we have the General Anti-Abuse Rule. At long last, the GAAR panel has found something worth considering and have announced that a gold bullion scheme is ineffective. We suggest that not many contractors are paid in bullion! While we also appreciate that HMRC wanted a ‘safe’ first project for GAAR, there is a marked need for some form of positive statement or, even better, action that will prevent the latest generation of “90% take-home pay” schemes from pulling in the uninformed.

‘Dawn’ raids

There have meanwhile been statements from HMRC about how the tax authority’s agents can “raid” taxpayer premises. This power has been around for a very long time. The latest iteration is aimed at large corporates, but has been released by HMRC -- in terms of its wording -- in a manner that suggests all taxpayers can be impacted. Please. I often criticise promoters and others for their use of semantics and suggestions of ‘HMRC-approval’ of their latest scheme. Should we be any less critical of HMRC which is increasingly under the spell of the Behavioural Insights[iii] team which is in many instances straying into the same mistakes?


Let’s take that 2019 disguised remuneration charge again. It is retrospective. HMRC claim it’s not because “it’s a new tax on a new source” and taxpayers can remove that source before the trigger date of April 5th 2019. If it really is a new charge on a new source, why do they say that if you are non-resident on April 5th 2019, you can still be charged? A tenet of UK legislation is the restriction of a charge to those who live in the UK. For tax purposes, these people are “resident”. Here though the tax base is being extended because the loans were drawn when the “taxpayer” was resident, i.e. in the past.

Further the charge relies upon extending Part 7A ITEPA 2003, backwards in time. It says that if you had a loan in 2002, that would, if Part 7A had been written by then, be chargeable, then you owe tax in 2019. That is retrospection. It is to be hoped that the Revenue’s political masters see through the carefully constructed responses from HMRC (perhaps they are using Behavioural Insights to shape responses to Government!?). And then, hopefully, they will see the damage that this causes UK Plc.

Guiding lights

Our BIG GROUP meets HMRC regularly and although some of the developments covered above were anticipated, the fact that the work on the typical contractor’s tax position is moving to offices in Edinburgh and Glasgow is going to slow everything down. We continue to seek a fair settlement, but HMRC seems determined to put up barriers. We shall continue of course because common sense will surely prevail. Right, HMRC?






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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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