HMRC is set to challenge offshore employment schemes which use loans to pay contractors based in the UK, and says it will be looking to reclaim any unpaid tax due going back several years.

HMRC says contractors and other professionals are using these arrangements to avoid tax by entering into a contract of employment with an offshore employer, while providing their services in the UK. Typically, participants in such schemes receive a substantial proportion of the fees for their services in payments which are said to be loans. But HMRC states it does not agree that these arrangements succeed in avoiding tax.

It says that individuals using these schemes may already have received letters opening enquiries into their recent returns, and that over the coming months, HMRC will be sending tax assessments to those who have used such schemes between 2008 and 2011.

Anyone who receives such an assessment will have the option of either paying the tax HMRC says is due, or appealing, and HMRC says further information about the rules on assessing and how to appeal is being issued along with the assessments.

Earlier this year, HMRC consulted on plans to create an income tax and NICs charge on offshore intermediaries employing workers in the UK and, in the case of a default, moving this charge to an onshore engager of the labour, in specified circumstances. The consultation Offshore employment intermediaries closed on 8 August 2013.