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Attack on high-risk avoidance schemes

HMRC are going to be on the Attack on high-risk avoidance schemes. Details of the most “aggressive and artificial” tax avoidance schemes are to be listed by HMRC, as the department continues its attempts to recoup additional revenue for the public purse.

A consultation document, High Risk Tax Avoidance Schemes, proposes to describe in regulations the packages that are unlikely to deliver the savings claimed. Users will be required to disclose their chosen scheme to the taxman, and they will be subject to an additional charge on underpaid tax  but they will be able to protect themselves from the charge by paying up-front the amount in dispute. The measure is the latest in the Revenue’s ongoing battle against tax dodging, which recently saw the launch of an initiative to target businesses that are not registered for VAT in spite of trading above the tax’s threshold (see below).

HMRC say they recently have had significant impact on deterring tax avoidance behaviour  particularly through Spotlights, the consumer advice online  but they warn that a minority of scheme promoters and users are still content to sell and buy aggressive and highly contrived tax avoidance schemes that do not work under existing legislation. Users currently benefit from deferring the disputed tax payment until the Revenue has completed an investigation.

The Exchequer secretary to the Treasury, David Gauke, said, For too long, wealthy taxpayers [have been] using these schemes as a cheap loan from government. Our proposals would stop this practice, reducing the cost of HMRCs interventions and ensuring a fairer tax system.

Tax advisers and professional bodies are invited send their comments to Philippa Staples,  Room 3/45, 100 Parliament Street, London SW1A 2BQ. The consultation’s deadline is 31 August 2011.

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