Budget Note 66 – what you need to know

March 2008 saw the chancellor announce a crackdown on abuse of loopholes regarding taxation treaties. Double taxation treaties that exist between the UK and other countries became closely watched due to schemes that were enabling people, to avoid, paying tax.

Tax avoidance schemes had been put in place to allow contractors and other UK workers to be able to pay their income tax to off shore locations, whilst still maintaining their working and living rights in the UK.

So what is the government saying? In the Budget Note 66, or BN66, it has highlighted the governments intentions to clear up the matter. It stated “UK residents are taxable on their income wherever it arises. A wholly artificial scheme seeks to avoid UK tax by artificially diverting income of a UK resident individual to a foreign partnership comprised of foreign trustees.”

It was found that many UK workers were able to pay income tax in the Isle of Man and other locations whilst remaining both working and living in the UK. The BN66 went on to state that “If you would have been liable to UK tax and NICs had you been employed directly by the client, you must pay UK tax and NICs under these rules, whether or not your service company is located in the UK.”

The BN66 was brought in to ensure that no abuse of double taxation arrangements could take place. If you are a freelancer, contractor or consultant it is important to make sure you are up-to-date on the latest laws regarding tax and VAT. You are responsible for your own tax and NICs and must keep on top of your payments. The government is continuing its clampdown on those who are either avoiding paying tax or using an off-shore tax vehicle to enable them. If you are unsure it is always best to seek advice. The best way is to speak to an accountant who can give you expert advice on the current tax laws