Recently, HMRC conducted a raid and seized compromising materials. This is a reason for concern for those IT contractors who are using offshore trusts.
HMRC had stated for a long time that they intended to target offshore schemes. The exchequer needs these raids, and all political parties agree with this point of view. However, the contractors who have been advised to opt for offshore trusts may be able to take legal action against the promoters of these trusts. In fact, it is believed that the raids will have far-reaching effects.
Today, there are debt transfer provisions in place, so offshore schemes will have an impact not just on the contractors using them but also on promoters, advisers, engagers and intermediaries. Even recruitment agencies are under the scanner and as a result they are becoming more risk averse. That is why the taxman has put an incentive in place that allows users to come clean by March 2017.
As an IT contractor using an offshore trust, you should realise that the taxman will not directly pursue advisers, engagers and promoters of the scheme. In all probability, HMRC will initially pursue the scheme before it begins targeting contractors. However, it is difficult to ascertain whether this will lead to criminal investigations into the scheme since it will depend on the initial results of the enquiry conducted by HMRC.
It is prudent to remember that each taxpayer and company is responsible for their own taxes. Hence, HMRC will pursue every case on that basis. It is only after the taxman exhausts the initial enquiries that they will look at other options, such as debt transfer provisions. An IT contractor can take legal recourse only if the promoter of the scheme had assured the contractor that it was compliant with the tax laws. However, it is best to consult a solicitor or IPSE, the contractor body.
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