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Contractors warned about PSC tax avoidance

Contractors who were hoping to be able to avoid the upcoming disguised remuneration loan charge through the use of a scheme involving a personal service company (PSC) have been warned against this by HMRC.

This is the fourth warning that HMRC has issued connected with this charge. The latest one involves the use of a PSC as well as a limited liability partnership (LLP) with HMRC indicating that it will pursue any business that employs such a scheme to try and avoid the charge.

The scheme is complex and sees the contractor set up a PSC that they are the sole or majority shareholder in, through which they supply their professional services to a client. At this point the PSC and contractor set up an offshore LLP in partnership with each other. The bill to the client is sent by the PSC, which gives the contractor a roughly minimum wage rate salary.

The remainder of the money from the client for the service is transferred into the LLP and any money drawn from it is classified as a loan, because the contractor has not paid directly into it.

However, HMRC is warning contractors that it will view such schemes as deliberate avoidance and businesses using them could find themselves liable both for the charge and additional fines. Business owners may need to speak to specialist contractor accountants in Liverpool or wherever they are based to make sure their arrangements are above board.

The disguised remuneration loan charge comes into effect on 5th April.

Posted by Mark
April 1, 2019

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