contractor taking offshore composite company loan

gav_jones · Postby **gav_jones** » Wed Mar 14, 2007 11:57 am

Hi all,
I am currently contracting in UK and being paid a small salary in UK and the rest as a 'non repayable loan' from a company operating in the Chanel Isles. The scheme management say that it's compleyely compliant with UK tax laws but I'm a little unsure and don't know whether to open a ltd company in light of Gordon's new laws governing MSC'S that comes into play in April.
Is anyone aware of these schemes and are they legal?
Thx for any answers!

Simon Sweetman · Postby **Simon Sweetman** » Thu Mar 15, 2007 1:24 am

A "non repayable loan" doesn't look very like a loan to me, it looks like a payment of income. You say that you are not operating through a company and being paid a salary so are presumably employed by somebody.

It doesn't sound as if it works, but there may be more to it than meets the eye.

Taxbar · Postby **Taxbar** » Thu Mar 15, 2007 5:25 am

Are you UK Domiciled?

If so,this scheme is under HMRC Enquiry in various forms from various suppliers.

It does not in my view, work.

You should take advice with a view to negotiating a settlement with HMRC.

Moving forward is another issue.

Strategic Tax Planning
info@stratax.co.uk

CDavey9501@aol.com · Postby **CDavey9501@aol.com** » Thu Mar 15, 2007 11:09 am

Another one of those composite schemes that gave the industry such a good name. It seems that those supplying the IT and electrical industry are the worst (or am I being cynical?).

CDavey9501@aol.com · Postby **CDavey9501@aol.com** » Thu Mar 15, 2007 11:28 am

Has me wondering can we all start paying our workers 'non-refundable loans'? Of course the size of the loans will bear an uncanny relationship to the amount and type of work provided by the worker.

Seriously, it may be a little difficult for HMRC to get a hold of the off-shore company but probably a little easier to go after the (sub)contractor and/or their client. I'd think twice about this if I were you. All those non-refundable loans appearing regularly in your bank account may cause some sleepless nights should you become subject to an enquiry. Also your client may not wish to be so reckless for the sake of some short-term cost savings. Paying an off-shore company may come back and bite you/them on the you know where.

gav_jones · Postby **gav_jones** » Mon Mar 19, 2007 3:42 pm

Thx everyone for the feedback - I think I'll play safe and go down the ltd company route!
Cheers.