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HMRC launches full investigation into K2 scheme

A full investigation into the K2 scheme and other such tax avoidance systems has been launched by Her Majesty’s Revenue & Customs, it was recently announced.

Contractors and freelancers may be familiar with the scheme, especially since many held K2 up as a viable alternative to the complex and daunting IR35. For those not self-employed, most will know K2 from the massive media blowout regarding comedian Jimmy Carr using the system to funnel cash into an account overseas in an effort to avoid having to pay taxes on his earnings.

The scheme, which is based on the island of Jersey, involves people having their before-tax earnings invested abroad only to return the cash as an interest-free loan. The scheme has been acting as a tax shelter for around £168 million a year, according to some estimates, leading to one HMRC spokeswoman to remark that the government will be taking steps to challenge it in every way it can if its investigation reveals that the scheme actually works.

While the K2 system is completely embroiled in massive controversy at the moment, industry experts are quick to say that it does not actually violate any taxation regulations as they exist presently. However, the intent is to indeed act as a way to avoid having to pay your fair share of taxes, something that the government is determined to put an end to, the HMRC spokeswoman added – regardless of who you are or how famous you may or may not be.

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