Thousands of oil and gas contractors accused of involvement in a tax avoidance scheme have received demands for cash from HM Revenue & Customs (HMRC).
More than 22,000 contractors who sheltered their earnings offshore in now outlawed employment benefit trusts more than seven years ago are now paying the price for breaking tax rules.
Accountants sold them what HMRC describes as ‘aggressive tax avoidance’ plans as a way to minimise income tax and national insurance contributions owed in the UK.
HMRC is demanding they pay the tax they owe plus interest within 30 days or face debt collectors and, in some cases, bankruptcy.
Some contractors have reportedly had tax bills of £30,000 dating back to jobs they held seven years ago.
HMRC is calling in the cash under new accelerated payment powers.
The power was designed for halting wealthy investors, such as sports and showbiz celebrities from stacking up artificial losses to offset against other income through film production partnerships.
After collecting more than £1 billion in tax from them, HMRC is now moving on to fry smaller fish.
The original targets were all earning £100,000 or more a year, but the oil and gas contractors earn an average £60,000 to £80,000 a year.
Accelerated payment turned the tables on taxpayers.
Tax avoidance claims
Previously, taxpayers notified HMRC they belonged to a tax avoidance scheme and the tax man had to challenge whether the scheme worked. In some cases, legal action took up to a decade to declare the scheme void and then to claw back the tax.
Now, any taxpayer who declares they are in a tax avoidance scheme must pay the tax they claim the scheme is saving them upfront and then prove the scheme works.
“Belonging to a tax avoidance scheme does not mean a taxpayer never has to pay the tax they owe,” said an HMRC spokesman.
“Anyone receiving a notice needs to pay the tax in 30 days or face action to collect the debt. Of course we recognise there will be some hardship cases, and anyone who cannot pay should contact us as quickly as possible so we can make some arrangement for them to pay.
“If their tax planning is proved to be correct, then the tax is refunded with interest.”
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