Loan Schemes

Loan schemes are systems where an organisation employs you and utilises the reduced tax rate applicable to employee loans to minimise tax. Its an area which the Inland Revenue are paying close attention and you should be cautious in pursuing one of these schemes. You will receive a small payroll and the bulk of your earnings will come as a "loan".

Taxation Minimisation through Loan Schemes


In essence you are salaried employee and are also loaned funds by your employer. Loaning employees money is actually a very common practice for companies - but it tends to be small value loans for such purposes as short term cash flow issues when a new employee starts. Using loans to reduce tax for contractors is a more complex situation that requires a thorough assessment.

Some structures which offer loans to employees are registered with the Inland Revenue and advised by QC's that they are compliant with Tax legislation. This removes an element of risk - however its worth bearing in mind that Loan Scheme Contracting structures have been targeted by retrospective legislation.

Due to the risk and the aggressive targeting by the HMRC we don't recommend that you use loan schemes in the UK.