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On 28 January 2010, the Royal Court of Justice ruled that the retrospective effect of Budget Note 66 (BN66) is not unlawful. This effectively means that HMRC can now go back and retrospectively apply a piece of tax legislation (BN66) which will affect thousands of contractors who either once used or are currently using an offshore scheme/company in order to avoid paying UK taxes.

Mr Justice Parker rejected claims put last week on behalf of a taxpayer, Robert Huitson, that the backdating of Section 55 of the Finance Act breached human rights. His court also refused an appeal, paving the way for HMRC to pursue Huitson, an IT contractor, and thousands of others like him.

“At no time did HMRC indicate to affected taxpayers, including the claimant, that they could safely rely upon the arrangements,” the judge ruled. “HMRC consistently maintained that the arrangements did not work, and advised taxpayers to pay on account the income tax which HMRC said was properly due.”
 
HMRC assessments can now be backdated as far as 1987 (the date when BN66 was imposed), so even if a contractor used an offshore scheme that same year just for one day or one year, they may now be liable for both fines and backdated taxes.
 
This news further supports the fact that contractors should think very carefully before using offshore schemes as a way of avoiding paying UK taxes. Setting up and working through your own UK limited company is and has always been the most tax efficient way of working legally.

For more information on setting up your own limited company through JSA, please contact: newenquiries@jsagroup.co.uk.
 

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