HMRC has published a list of more than 800 schemes that it believes are deliberately designed to avoid tax.
The list consists of a series of numbers, allowing them to be identified by the tax-payers involved.
As soon as it receives new legal powers in August, HMRC will be demanding the disputed tax as “accelerated” payments.
Although tax avoidance schemes almost always claim to be approved by HMRC, in reality this is never the case.
Promises that sound too good to be true generally are, and unfortunately many thousands of people have ended paying far more than the tax they would have originally been due.
Promoters of most tax avoidance schemes will make outlandish claims of rich rewards but fail to provide a full explanation of the associated risks. This means that when the scheme is investigated by HMRC it will be the schemes clients who are left facing heavy penalties.
Indicators that a scheme should be avoided:
- the tax benefits or returns are out of proportion to any real economic activity, expense or investment risk
- the scheme involves arrangements which seem very complex given what you want to do
- the scheme involves artificial or contrived arrangements
- the scheme involves money going around in a circle back to where it started
- the scheme promoter either provides any funding needed to make the scheme work or arranges for it to be made available by another party
- offshore companies or trusts are involved for no sound commercial reason
- a tax haven or banking secrecy country is involved
- the scheme contains exit arrangements designed to side-step tax consequences
- there are secrecy or confidentiality agreements
- upfront fees are payable or the arrangement is on a no win/no fee basis
- the scheme has been allocated a Scheme Reference Number (SRN) by HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) regime
No scheme is ever approved by HMRC
In particular, ignore the claims of any promoter that their scheme has received HMRC approval simply because it has been allocated a SRN under the DOTAS rules. All this indicates is that the promoter has fulfilled their legal obligations by registering the scheme with the Revenue. Quite simply, HMRC never approves tax avoidance schemes.
Any associated insurance offered by promoters in the event that their scheme should fail HMRC tests should be treated as a warning sign that there exists doubt about the schemes validity in the first instance.
It goes without saying that any involvement in a tax avoidance scheme will automatically flag up a person as a high risk taxpayer and they can expect to receive unwanted attentions of HMRC into the whole of their tax affairs.
If anyone is worried about their involvement in a tax avoidance scheme and want to get out of it then they can contact HMRC’s Anti-Avoidance Group by telephone on 020 7438 6733 or e-mail them using a secure online enquiry form to discuss their concerns.