ASA calls out contractor loan scheme promoter for false advertising

The Advertising Standards Authority (ASA) has upheld a complaint by HMRC that advertising by a contractor loan scheme promoter, Williams Gordon, was misleading and must be withdrawn.

Such schemes work by paying contractors a small part of their earnings as a PAYE salary, with the rest paid as a loan, on which it claims no tax or National Insurance is due.

What the ASA ruling means

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

As well as ruling that these statements were misleading and must be withdrawn, the ASA also found that the Williams Gordon website “misled by omission”, by failing to mention the multiple anti-avoidance measures that the scheme was flouting, including the General Anti-Abuse Rule and the loan charge on disguised remunerations loans outstanding on 5th April 2019.

All users of the scheme will be subject to an HMRC enquiry and will be affected by the loan charge if their tax affairs aren’t settled before 5th April 2019. As well as having to pay back any extra tax due, users may also incur penalty charges.

“Spurious claims”

Liquid Friday’s Operations Manager, and recently appointed FCSA board-member, Joe Taffurelli, welcomed the ruling and dismissed the claims in question as “spurious at best”.

He commented:“This is absolutely the right call by HMRC and the ASA. The claims made by this loan scheme promoter are spurious at best. The loans that their business model hinge on should have tax and NI deducted in the same way as any other employment income. It is clearly being marketed as a tax avoidance arrangement which puts legitimate umbrella companies in a bad light, so we are glad to see action being taken. We are hopeful that this ruling will set a precedent for other similar schemes so that we’ll eventually see them stamped out for good.”

Telling the goodies from the baddies

Contractor loan schemes are heavily promoted to unsuspected contractors as a solution which will let them take home significantly more money. Their claims can appear very plausible. But don’t be fooled. If you receive a letter or email which makes promises which sound unrealistic, take it with a large pinch of salt.

The one assured way to determine whether an umbrella company is truly legitimate and compliant is to choose one which is a fully accredited member of the Freelancer and Contractor Services Authority (FCSA).

Every FCSA Accredited member has undergone tough independent testing against the association’s Code of Compliance, so whether you are a contractor or a recruitment agency, you have the peace of mind that the umbrella company you are working with is operating at the highest industry standards.

If you have been involved with a contractor loan scheme like the one the ASA clamped down on, or an arrangement that sounds similar, we might be able to help. Get in touch

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