HMRC is stepping up its campaign to tackle the use of 'contractor loan' tax avoidance schemes in the light of a recent First Tier Tribunal (FTT) decision that loans received by an IT consultant were taxable as employment income.

The department has published a 'Spotlight' warning about schemes where individuals sign an employment contract with an offshore company and receive a large proportion of their income in the form of a 'loan' from their employer - either directly or through an intermediary.

HMRC says that the FTT's ruling in the case of IT contractor Philip Boyle - Boyle [2013] TC 03103 (2013) UKFTT 723- 'comprehensively and robustly dismissed all the arguments' put forward. The tribunal ruled that the money Boyle received as a loan via an Isle of Man company was 'in substance and reality income from his employment' and therefore taxable.

At the tribunal, Boyle argued that if he had received income from his employment, it should have been taxed under PAYE by the offshore company and that he should not have to pay. The judge dismissed that argument as well, and said that even if the money Boyle received under the scheme was not income from employment, he would still have to pay tax as a result of the 'Transfer of Assets Abroad' rules.

In the latest Spotlight, HMRC says that any contractors who have been waiting for the FTT decision to be published should now come forward and resolve their tax status.

There are believed to be as many as 15,000 similar self-employed consultants who used this scheme and HMRC has estimated that their success in this case will now bring them £400m in additional tax.