I was a contractor for well over a decade and thankfully stayed away from these arrangements (though, not because Im smart, savvy or more well informed - but moreso by luck and circumstance). I saw fellow contractors using these arrangements for years and years on end, with no action from HMRC. There was no reason to suspect they were not ok.
There's a prevalent attitude in this country of "Im alright Jack".............. until you're not. By which time it's usually too late to act. I was initially smug when I heard about the Loan Charge 2019, but once I read up on it, it really opened up my eyes to the opportunism of HMRC and the misinformation which is spouted to try and turn people against each other.
A good analogy is the one of IR35. There were contractors more risk averse than me who would not operate through a Ltd company paying salary + dividends. The same argument applied to the Loan Charge "never being legal" could be made there - HMRC have been trying to get one man band Ltd companies (PSCs) to pay a higher rate of income tax since 2000. If they introduced a new law tomorrow to retrospectively demand it, would that be fair?
Let's dispel some myths. Loan arrangements were NEVER illegal and are still NOT illegal. It would be helpful if they were (!) because then the promoters of the schemes could be held to account. The arrangements may not have worked, but just because HMRC says an arrangement doesnt work, doesnt make it so. In fact, HMRC battled in court for years to prove the schemes did not work. The "big win" was RFC in 2015 - but the judgment was not one they wanted. The courts decision was that the loan arrangements were legitimate (i.e. loans were loans) but that the payment by the employer to the trust was subject to income tax (I believe they call it emoluments). That means the employer (or promoter, or whoever ran the scheme's PAYE arrangements) was liable to the tax. Except the problem was - these promoters/employers were either a) not around anymore, b) offshore, or c) well known rich and powerful Tory party donors. How was HMRC supposed to get the money from them? (Don't even get me started on the PPE contracts being awared to the same people who mass marketed and promoted these schemes).
And then we had the Loan Charge 2019. A way to claw back that tax from individuals (despite it never having been proven to be due from individuals) and let everyone else who benefitted from the arrangements (accountants, promoters, employers) off the hook. Individuals cannot effectively defend themselves - which HMRC are fully aware of.
I see the words "tax evasion", "illegal", "never worked" bandied about in the thread above. However, there's one simple question you should be asking:
If these arrangements never worked (as HMRC claim), why was it necessary to introduce a new law in 2017 to obtain the tax which was supposedly always due?
A simple question, which no HMRC representative or Govt minister has been able to answer.
