Guidance for Darwin Pay and IQ Contracts EBT scheme users
Darwin Pay or IQ Contracts EBT tax avoidance scheme user? If so you can expect to receive Accelerated Payment Notices from HMRC.
Darwin Pay and IQ Contracts Isle of Man (IOM) EBT Scheme
The Darwin Partnership Limited (Darwinpay) & IQ Consulting (UK) Limited (IQ Contracts) are contractor pay scheme arrangements (popular with IT contractors that went through the Darwin Pay umbrella company) involving an Employment Benefit Trust (EBT).
If you have used either of these tax avoidance schemes, you may recognise the following:
This blog will also be of interest to you if you were with the tax avoidance schemes Sanzar Solutions, Sanzar Partnership, IQ Contracts, IQ Consulting and Garraway Consultants Limited which are all run by the same promoter of Darwin Pay (the Darwin Pay umbrella company) and are all being investigated by HMRC.
Should Darwin Pay and IQ Contracts users consider the Contractor Loan Settlement Opportunity (CLSO)?
According to our HMRC tax specialist the answer is: Yes.
HMRC set up the Contractor Loan Settlement Opportunity (CLSO) for anyone who has used a Contractor Loans tax avoidance scheme before 6 April 2011.
Although the Contractor Loan Settlement Opportunity is not relevant for every Darwin Pay and IQ Contracts participant, EVERYONE who has used a tax avoidance scheme should at least contact HMRC and register for the CLSO before 30 JUNE 2015. Registering for the CLSO does not obligate you to take up the opportunity. It merely puts you in a better position with HMRC.
- By registering for the Contractor Loan Settlement Opportunity it merely gives you the option (but does not obligate you) to use the opportunity.
- The Contractor Loan Settlement Opportunity might exclude certain years completely for users where there is no open appeal against a discovery assessment or enquiry into a tax return for the relevant year.
- You will be taxed on the value of your invoices instead of the value of the loans which means you pay less tax (as your loans are treated as income under the Transfer of Assets Abroad).
- You will avoid paying National Insurance which may not be the case later.
- Most importantly, you are guaranteed to pay no penalties, which could be as much as 200% of the tax in the worst-case scenario.
But Darwin Pay users, remember time for the Contractor Loan Settlement Opportunity is running out!
Whether you are a contractor in the IT, Financial or Public Sector, you now only have until the end of the June 2015 to use the Contractor Loan Settlement Opportunity.
Time is also ticking if you have received your Accelerated Payment Notices (APNs)?
If you have used DarwinPay or IQ Contracts tax avoidance schemes and have received your APNs you now have less than 90 days to pay up.
As HMRC tax specialists we advise that you ask yourself the following questions:
- Are the Accelerated Payment Notices that you received from HMRC legal? (if not, they should be withdrawn by HMRC)
- Are your Accelerated Payment Notices correct? (if not, then the figures should be amended)
- Do you know what happens if you do not pay your Accelerated Payment Notices within the 90 day time limit?
- Have you made representations to HMRC?
- Are you entitled to an additional 30 days to pay? (where you have made representations against an APN, HMRC may grant you up to an additional 30 days to pay depending on how long it takes them to respond)
- Do you know what the penalties are for not paying on time? (if not, read our blog Accelerated Payment Notices, Penalties and HMRC Penalty Appeal)
- Are you going to challenge HMRC's position on Darwin Pay or IQ Contracts?
- Are you aware that the Employee Benefit Trust arrangements have inheritance tax implications.
- Do you think you need a HMRC tax specialist resolving your problems with HMRC for you?
If you need to speak to an HMRC tax specialist please call us on 02089582653 or contact us here.