Tax Avoidance Schemes

The vast majority of people in the UK don’t try to avoid tax: they pay the tax they owe when it is due and don’t try to bend or break the rules. A small minority of people are lured into tax avoidance schemes by the promise of big tax savings for little cost or effort.

But trying to dodge tax carries risks.

HMRC have published a booklet setting out their views on Tax Avoidance and I copy some of it below

So forewarned is forearmed!

They say that HMRC is very successful at tackling tax avoidance and employs teams of tax, legal and accountancy experts to challenge those who try to get out of paying their tax. Anyone tempted to use a tax avoidance scheme should think very carefully about the costs, the disruption caused by having to deal with HMRC enquiries and potentially lengthy litigation, and uncertainty over the outcome they may face as a result.

How can I tell if it’s tax avoidance?

You are entitled to plan your tax affairs in a way that makes sure you do not pay more tax than you have to. There are many legitimate ways in which you can save tax, for example by saving in a tax-free ISA, making donations to charity through Gift Aid, claiming capital allowances on assets used in your business

or paying into a pension scheme. But there is a big difference between using tax reliefs and allowances in the way in which they are intended to be used, and trying to bend the rules to avoid tax.

There are warning signs you can look for which should help you decide whether you are being offered good tax advice about how to plan your affairs or whether you are being sold a tax avoidance scheme.

Look out for the warning signs

Any of the following signposts should make you think twice:

• It sounds too good to be true and cannot have been intended when Parliament made the relevant tax law. For example, some schemes promise to get rid of your tax liability for little or no real cost, and without you having to do much more than pay the promoter and sign some papers
• 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.

Now!

This has not deterred a lot of people who are now under enquiry for many of these such schemes and HMRC’s specialist Counter-Avoidance Teams  are busy trawling through over 1000 schemes to call in the investors for scrutiny.

If you need help call Lindsay for a quick chat to see if all is not lost!!