BN66 Contractor Loses Court Case
A UK contractor who took advantage of a payroll scheme offered by Montpelier in the Isle of Man has lost his court case in which he was trying to have the retrospective element of BN66 classed as unlawful. The argument that this type of retrospective action was against human rights fell on deaf ears.
Robert Huitson an IT contractor had been using the scheme offered by Montpelier for several years but received a tax bill after HMRC changed legislation in 2008. The landmark case was the very first time that a judge had backed the retrospective element of BN66 and has left a great many contractors disappointed, many now face large retrospective tax bills. It’s almost certain that there will be more challenges to BN66 and the UK governments ability to penalise people under new tax legislation retrospectively. It should be noted the fuss and objection that was made by members of parliament when it was announced that expenses rules would be applied retrospectively. It appears as though independent high earners are not afforded the luxury of simply refusing like MPs. The scheme provider in this instance, Montpelier, have vowed to appeal the decision – although it will certainly be some time before this case will be heard by a higher level.
With this ruling it is now more important than ever to make sure that your payroll provider is acting in your best interests. For our recommended payroll solution please follow the link. This solution doesn’t rely on a double taxation agreement so BN66 has no impact.
IT Contractor Payroll
Of all the contractor groups currently operating in the UK it seems as though the IT contractor has been keenest on sourcing the right payroll solution. Many IT contractor payroll solutions have sprung up over the years in order to service this need, few have lasted the sands of time. One thing is certain though and that is most IT contractors seem to prefer the option of having somebody manage their payroll for them as opposed to forming their own limited company. These are just some of the payroll options that have been available:-
1. The Offshore Partnership. Based around double taxation legislation that permitted offshore companies to handle your payroll in a very efficient way. These schemes have all now been closed due to updated HMRC legislation.
2. Employee Benefit Trusts. Perhaps the most controversial payroll scheme to date for IT contractors. HMRC insist these are no longer compliant yet many scheme providers insist they are. Several providers have been investigated by HMRC. (Please see here for a tax efficient alternative to the EBT.)
3. Umbrella Company. A payroll solution that gives you the full statutory benefits of being a PAYE employee. Of course on the downside it is the most expensive payroll solution for IT contractors. The main benefit of an umbrella company is that it removes the burdens of running your own company.
4. Invoice Only (Gross Pay). Designed for contractors who are registered as self employed. An invoice only scheme gives you the ability to remain completely in control of your finances ensuring that all payments due to you are received gross. It’s then up to you to manage your own tax affairs. The main benefit for self employed contractors is that it removes the burdens of invoicing and chasing payment plus other administrative tasks.
There are several other solutions but the providers tend to be very shy on revealing the practicalities involved! If you’re currently an IT contractor operating in the UK and are stuck for a solution please feel free to use the contact form at the top of the page and we’ll do our best to put you in contact with a suitable payroll provider.
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Starting a new contract and looking for a new payroll provider? There is a solution available that has been in operation and in full compliance for 15 years, allows you to retain a minimum of 84% of your contract value and has many more benefits!
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Or simply call 0844 567 5657 quoting reference PB2.
