As part of its policy of reducing tax evasion and tax avoidance, HMRC has published its top 10 things tax avoidance scheme promoters are unlikely to tell you
If You’ve Ever Been Encouraged To Use A Tax Avoidance Scheme, You Should Read This
HMRC Reveals 10 Important Aspects Of Tax Avoidance
HMRC has successfully closed down the promoters of a number of tax avoidance schemes in the past few years, raising hundreds of millions of pounds in the process. But there’s a long way to go, as its target runs into billions.
Recently, HMRC has found a great deal of success by going after individual investors directly. It demands the payment of the disputed tax in advance of the conclusion of a Tax Tribunal hearing. As many of these individuals are high profile celebrities who want to avoid tax, it’s paying handsome dividends as they cough up the cash in an attempt to protect their reputations.
HMRC’s Top 10 Tax Avoidance Things Promoters Won’t Always Disclose
1. Most Schemes Simply Don’t Work
The promoter may be adamant the tax avoidance scheme is legal. They may even give you a positive QC’s opinion. But by definition, this can only ever be an opinion. The fact is if the scheme is flawed and doesn’t work, your tax return will be incorrect. And that isn’t in accordance with the law. You’re legally obliged to pay tax that is due and you could be charged penalties if you try to avoid it.
2. You Could End Up Paying An Awful Lot More Money
Tax avoidance schemes are often extremely complex. They usually give rise to unintended additional tax consequences. Despite the promoter telling you otherwise, the fees you pay the promoter do not count towards your tax bill. The result is that it could cost you a great deal more money than just the tax you’re trying to avoid.
3. You May Have Significant Legal Fees To Pay
If the tax avoidance scheme is taken to litigation, you’re likely to have significant legal fees to pay. Your promoter could ask you to pay into a ‘fighting fund’ up front. And once an action is started, your legal bills could quickly escalate to astronomical levels.
4. You Could Face Criminal Conviction
If you deliberately mislead or conceal information from HMRC as part of your tax avoidance, you could be prosecuted and convicted. Don’t under-estimate the knock-on effect that this can have for the rest of your life.
5. You Could Face Publicity As A Tax Avoider
If you are named in court papers when the case is litigated, or in public registers, you could be reported in the media as a tax dodger. The resultant damage to your reputation and the detrimental financial consequences that could follow may far outweigh the tax you’re hoping to avoid.
6. Your Scheme Is Never HMRC Approved
Whilst many promoters are under the impression a tax avoidance Scheme Reference Number from HMRC means the department has cleared the scheme, it’s simply not true. HMRC issues a Scheme Reference Number when a scheme has signs of being designed to avoid tax.
7. You Could Be Marked Out As A High-Risk Taxpayer
Your willingness to deploy a tax avoidance scheme could mark you out as a high-risk taxpayer. It means all of your tax affairs could be closely scrutinised in future, not just your claim for relief. Once HMRC has focused its attention on you, it’s not unusual to be questioned about your tax for many years into the future.
8. HMRC Is Likely To Beat Your Scheme In Court
HMRC wins eight out of ten cases where taxpayers and promoters take tax avoidance schemes to court. Is it really worth taking the risk that you’ll come out on top in the face of such poor odds?
9. The Risk Is Normally All Your Own
It’s unlikely a tax avoidance promoter will give you a guarantee that a scheme will work. Chances are they probably won’t be around to support you once HMRC starts investigating your tax affairs. Some promoters set up simply to sell a particular tax avoidance scheme, and then disband, leaving you out in the cold.
10. You’ll Have To Pay The Tax Up Front Anyway
No longer will you get a cash-flow advantage while HMRC investigates a scheme. A recent change in legislation means you’ll have to pay the disputed tax up front.
Visit HMRC’s website to read its full tax avoidance policy.
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Closing 1 February 2019
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