The Advertising Standards Agency (ASA) has upheld complaints by the tax office about a financial advice firm offering a contractor loan scheme.
Williams Gordon, which offers solutions for contractors, had made a claim on its website that customers could "take home up to 92 per cent of your pay", and described the solution as "legally robust".
The advert also claimed that Williams Gordon was "fully compliant with the necessary HMRC legislation and with all current IR35 policies. We also ensure that you remain tax compliant for the duration of the contract".
HM Revenue & Customs complained to the ASA that Williams Gordon was running a known contractor loan scheme that pays contractors a small part of their salary as Paye income, with the rest paid as a loan, on which it is claimed no income tax or National Insurance is due.
The tax office stated their understanding of the contractor loan scheme is that contractors are employed by an umbrella company that supplies the contractor's services to their end-client, the umbrella company invoices the end-client and retains 10 per cent as a fee.
The umbrella company then 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 then paid to the contractor in the form of a loan with terms that mean it is unlikely to ever be repaid.
The ASA upheld three complaints against Williams Gordon, all made by HMRC.
These included whether the claim that you could take home 92 per cent of your pay was misleading, and the claim that "We are fully compliant with the necessary HMRC legislation and all current IR35 policies. We also ensure that you remain tax compliant for the duration of the contract" and "Not only providing the highest return, but doing so in a legal, robust, documented and defendable way" was inaccurate.
The third complaint concerned the company's offering of corporation tax planning.
The Williams Gordon website stated "We can help if you have an overdrawn directors loan account and want to negate the tax liability on this.
"We can also help if your current year’s profits will be liable to corporation tax and you want to reduce/not incur the tax. Our product combines corporation tax relief, with non-taxable personal payment".
HMRC said that this was an avoidance scheme, and that users would be challenged.
The ASA upheld all three claims, though it acknowledged that Williams Gordon said that the HMRC understanding of its schemes was incorrect.
The ASA said that Williams Gordon had provided insufficient information for customers to explain the nature of their arrangement, how the arrangement complied with standard income tax and national insurance payments, and how it would not leave users at risk of a challenge from HMRC.
The authority ruled the advert must not appear again in its current form.
The ASA ruled: "We told Williams Gordon Ltd to ensure they held sufficient evidence for their claims and to disclose any relevant information in their advertising, such as the implications or risks of entering into a financial arrangement, including a challenge to a user's tax arrangements by HMRC and the charges which might apply."
Mark Turner, director at Williams Gordon, said the decision was a "whitewash".
He said: "The ruling doesn't represent the arguments we put forward, so it is very difficult for us to see how they upheld it."
He added that the 92 per cent claim was "feasible depending on people's rates.
Mr Turner said: "They upheld every single argument no matter what we said."
Williams Gordon has changed the wording of its advertisements on its website.
