The Daily Mail on 21st August carried a report saying that more than 50,000 contract workers — including nurses, teachers, and small business owners — have been hit with backdated tax demands (under the so-called “Loan Charge” clawback arrangements introduced by HMRC) for as much as hundreds of thousands of pounds. These involved paying workers using tax-free loans from offshore trusts that did not need to be paid back. By paying the workers a loan, it meant employers did not need to pay income tax and National Insurance contributions. Since April, any such “loans” became taxable, meaning that freelancers who used the legal loophole face a retrospective tax bill on all their income since 1999 that was paid using the loans. One example cited involves a man who used an “umbrella” company — based on the Isle of Man — which took around 15% of his income in fees and he missed out on pension contributions, holiday and sick pay that employees normally get. A tax barrister is quoted as saying that many workers had to sign up to the scheme in order to get paid, and were given no indication they were doing wrong.
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