Contractor Loans Settlement Opportunity ends in 90 days - what should I do?

The Contractor Loan Settlement Opportunity expires in about 90 days and counting. A lot of IT Contractors caught up in Tax Avoidance Schemes are still choosing to ignore it... but is this wise?

A contractor loan scheme is a tax avoidance arrangement where non-UK employers have paid you untaxed income or given you a loan instead of part of your salary. If you’ve taken part in a contractor loan scheme you may still have to pay Income Tax on the loan. You can use the contractor loans settlement opportunity to bring your tax affairs up to date on the best possible terms. This opportunity is for the tax years up to 5 April 2011 and is now open until 30 June 2015.
— HMRC - Guidance: Tax on Contractor Loans

Why apply for the Contractor Loan Settlement Opportunity?

Applying for the Settlement Opportunity does not commit you to anything. It just provides you with a tax and interest calculation from HMRC, and if the arrangements involve a Trust, their view on your Inheritance Tax position.

You do not have to settle with HMRC and we can explain the implications of this for your particular case.

So, although we are not generally advocating that you take up the Settlement Opportunity, here are two of the many reasons why you should at least engage with HMRC before expiry of the deadline on 30th June 2015.

  1. To quantify which years and amounts HMRC say are included in the dispute and confirm that these are in fact correct. This can take some time.
  2. In preparation for the Accelerated Payment Notices (which will only allow 90 days to quantify the correct liabilities) and agree terms for payment within the deadline (to avoid Late Payment Penalties).

Whether to actually take up the Settlement Opportunity depends on the facts of your case and the decision is probably best made with the benefit of professional advice which HMRC are saying you may wish to take.

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P.S. Please feel free to share your opinions on applying for the Contractor Loan Settlement Opportunity or post any questions here. I will get back to you with a response from our Tax Specialist.