Contractor loan schemes: misleading advertising (Spotlight 42)

The Advertising Standards Authority (ASA) has ruled against misleading advertising of contractor loan schemes by scheme promoter, Williams Gordon.

HM Revenue and Customs (HMRC) complained to the ASA about misleading advertising by a tax avoidance scheme promoter, Williams Gordon.

The ASA agreed with HMRC and ruled that the claims made by Williams Gordon are misleading and must be withdrawn.

How this scheme is claimed to work

The scheme advertised by Williams Gordon is a known contractor loan scheme. The scheme pays contractors a small part of their salary as PAYE income, with the rest paid as a loan, on which it’s claimed no Income Tax or National Insurance is due.

The Williams Gordon website claimed that you could “take home up to 92% of your pay” and that they’re “fully compliant with the necessary HMRC legislation and with all current IR35 policies”.

HMRC’s understanding of the contractor loan scheme is that:

  • contractors in this scheme are employed by an umbrella company which supplies the contractor’s services to their end-client
  • the umbrella company invoices the end-client and retains 10% as a fee
  • the umbrella company pays the contractor a salary at, or just above, the National Living Wage but below the limits for tax and National Insurance
  • the balance of the invoice is paid to the contractor in the form of a loan with terms that mean it’s unlikely to ever be repaid

Loans like this are no different to normal income and should be taxed in the same way as any other employment income.

Not all umbrella companies use avoidance arrangements like this. Most deduct the correct amount of tax and National Insurance from the full salary paid to the contractor.

The ASA ruling

The ASA ruled that claims made by Williams Gordon are misleading and must be withdrawn.

It also ruled that the Williams Gordon website “misled by omission” - by failing to mention the many government tools and policies aimed at the avoidance they were promoting.

This includes the General Anti-Abuse Rule and the loan charge on disguised remuneration loans outstanding on 5 April 2019.

The Williams Gordon website also fails to highlight that the contractor loan scheme offered is a form of tax avoidance which HMRC believes doesn’t work.

All users will be subject to an enquiry by HMRC and will be affected by the loan charge if they don’t settle their affairs before 5 April 2019. As well as any extra tax due, penalties may also be chargeable.

What this means for promoters

The ASA ruling sets an example, so other avoidance promoters can’t make the same claims about similar schemes.

Williams Gordon and other promoters of similar schemes must now remove these claims from their advertising or risk facing ASA sanctions for failing to comply with its rulings.

What to do if you’re using a contractor loans scheme

If you’re using contractor loan scheme, or have used one in the past, HMRC strongly advises you to withdraw from the scheme and settle your tax affairs. You’ll avoid the costs of investigation and litigation, and minimise interest and penalty charges on the tax you should have paid.

If you’re already speaking to someone in HMRC about the use of an avoidance scheme, or have a customer relationship manager, you should contact them.

If you don’t have a contact and think you’re in one of these schemes, to settle your tax affairs you should email

Find out more about how to identify tax avoidance schemes.

Published 14 February 2018