HMRC crackdown could affect Contractors using Offshore Limited and Umbrella Companies

HM Revenue and Customs is now mid-way through their consultation on ‘Offshore Employment Intermediaries’ which may dramatically impact those freelance technology and engineering contractors that currently use offshore arrangements to reduce their tax liabilities.

“The existing legislation has been exploited, particularly in certain sectors, allowing companies who are willing to set up offshore arrangements to gain a competitive advantage over those businesses who play by the rules,” the consultation said. “This new legislation that is proposed is intended to level the playing field and ensure that the correct income tax and NICs is paid in respect of all workers in the UK.”

Depending on the outcome of the consultation, which closes on 8 August, HMRC could start issuing penalties in the fiscal year 2015/16 as they strive to recover £90m in tax by closing this loophole. However, they have proposed a ‘soft landing’ of the policy meaning that in the first year there will be no penalties for late returns or for providing incomplete information and they will take a lighter approach to sanctions if company’s can show they have taken reasonable care to submit the correct return.

If this affects you and you are looking for further information you can download the full consultation here