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Tax avoidance schemes and HMRC… time to settle?

17th Apr 2014
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This year’s budget presented a mixed bag for those keen on keeping a lid on the tax they pay to HMRC, though there is some light at the end of the tunnel if you are prepared to negotiate.

Now the dust has settled, accountants and business people alike are trying to work out in amongst all the political posturing and electioneering, Was the budget good for me?

This recent budget, presented by George Osborne to Parliament on 19 March 2014, seeks to tackle tax avoidance schemes head on.

HMRC are getting even tougher with marketed tax avoidance schemes and implementing accelerated payments of tax measures, meaning taxpayers will have to pay upfront any disputed tax not disclosed under DoTAS or deemed not to be a reasonable course of action by the GAAR Advisory Panel.

But the devil really is in the detail…

Once the legislation comes into effect, the new measures will not only apply to those taxpayers entering into marketed avoidance post legislation, but to those who already have an open enquiry or appeal into their tax affairs. They will have to pay the disputed tax within 90 days or face penalties for late payment.

So the question for accountants and more importantly their clients, should I settle?

There are currently a number of formal HMRC Settlement Opportunities currently available, the most notable being for EFRBS and EBTs. However these opportunities do have a limited shelf life, with the EFRBS opportunity closing in June 2014 and HMRC have advised the closure of the EBT Settlement Opportunity (‘EBTSO’) in the coming months.

Negotiate with HMRC

HMRC may be receptive to negotiations on open enquiries where no formal Settlement Opportunity in place and have offered a number of concessions under the current EBTSO. Effective rates of tax can be fairly low - we have seen these in the region of 17% - 33%, depending upon the particular circumstances.

Payment terms can also be quite flexible, with instalment plans up to 12 months being readily accepted and longer term payment plans also being negotiated and accepted by HMRC. This is a far cry from the 90 day payment demands that could be imposed under the new measures.

So what to do next…

There’s no one solution that works for everyone, it’s important to review the options and get the right advice before deciding on a course of action. Whether that’s through negotiations with HMRC or a formal settlement opportunity, either way time is of the essence with the options narrowing in the coming months.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
17th Apr 2014 13:12

I'd be interested in your thoughts...

...on Nick Huber's "Twilight of the tax boutiques" analysis piece.

Will DOTAS, GAAR and the like pull the plug on the specialist tax planning industry and have you adjusted your own approach as a result?

This post focuses on the settlement opportunities available, so there is obviously a transitional/defensive strategy option - but what next? One of the implications of Nick's piece is that disgruntled clients may start looking for advisers to sue if they don't manage to save as much tax as they had expected.

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By User deleted
17th Apr 2014 16:34

Personally ....

... I think the pay up front initiative is inspired. I do think having HMRC as judge, jury and executioner not so good - better to have independant review board.

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Tax avoidance schemes

Some Accountants are already talking to their clients, and to us (as Insolvency Practitioners), about the possible impact this could have on them.

There are some very nervous people who are worried about how it could affect them and their businesses.

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