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Legacy Tax Avoidance Schemes – where are we now?

23rd Nov 2018
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lifecycle
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The background

In recent years, in support of Government policy and public opinion against tax avoidance, HMRC have got themselves “tooled up”, becoming “armed and dangerous” in their pursuit of over 100,000 users of tax avoidance arrangements.

In the courts, HMRC are winning most of the avoidance schemes being litigated. New DOTAS registrations are negligible which suggests that HMRC’s approach is having its desired effect or that promoters are being driven underground.

In 2014, HMRC’s Counter Avoidance unit was set up to tackle marketed avoidance in a more structured and efficient way. To assist, the Government has enabled legislative changes such as:

  • GAAR – the General Anti Abuse Rule – the “nuclear” option to tackle the most abusive arrangements
  • Follower Notices – HMRC target all users of comparable arrangements to tie them to a final court ruling
  • APNs – Accelerated Payment Notices – takes away any cashflow advantage for users of DOTAS schemes
  • STAR – Serial Tax Avoiders Regime – 5 year warning period for defeated scheme users
  • DR Charge – Disguised Remuneration or “loan” charge – charges all outstanding loans from 6 April 1999 onwards as earnings on 5 April 2019

What’s coming?

HMRC have recently won a number of high profile tax cases in the courts including:

  • Murray Group (Rangers FC) which supports the principle that loans from the employer were in reality earnings
  • Samarkand, Proteus and Eclipse – all film schemes found not to be trading and trade losses were denied

Many more cases are in the pipeline, and it is clear that HMRC will not hesitate to issue Follower Notices whenever possible.

The forthcoming loan charge is a key priority for HMRC as it says: “It is estimated that up to 50,000 individuals, or less than 0.2% of individual Income Tax payers in the UK, will be affected by the loan charge.”

The actual numbers could be larger and HMRC have been running a settlement opportunity in advance of the new charge on 5 April 2019. The two major groups affected are users of Contractor Loan Schemes and employers who made loans to employees via EBT/EFRBs.

HMRC have been settling these cases for a number of years now and are alive to the difficulties for some users in being able to meet the additional duties being sought.

HMRC are sympathetic to affordability issues but it cannot be taken for granted that time to pay will be given. HMRC expect liquidations, bankruptcy etc. and it is believed that the loan charge will precipitate many more.

Conclusion

There is currently a lot of uncertainty surrounding this issue however, what is certain, is that HMRC (supported by Government) will continue the drive to counter the use of tax avoidance schemes by individuals and companies alike. HMRC are looking for both yield and behaviour changes to clear large numbers of outstanding cases. They are under continual scrutiny from the Public Accounts Committee to deliver.

They will continue to litigate users who do not wish to settle and deploy the weaponry at their disposal to get users to give up and settle. In relation to the loan schemes, HMRC are aiming to settle 80% of tax under consideration before April 2019 and also aim to have 90% of non-loan schemes in litigation or to be litigation-ready by April 2019.

From the taxpayer’s perspective, settlement allows matters to be controlled. If you or your clients are interested in exploring this option then please contact [email protected].

Lifecycle


FREE SEMINARS IN MARCH 2019

As part of our ongoing training for members of the Lifecycle accountant’s network, we are running a series of free 90 minute seminars on this topic at venues across the country in March 2019. Our guest speaker, tax expert Chris O’Hara, will provide a general update on HMRC activity, policy and legislative changes to tackle historic tax avoidance schemes. The session will also consider the options available to your clients (individuals and companies) who have used such schemes to mitigate tax.

March 2019 dates – all 8.30am start unless stated

Preston – Samlesbury Hotel – 5th Liverpool – Racquet Club – 6th
Wilmslow – Stanneylands Hotel – 7th              Manchester – AJ Bell Stadium – 12th
Leeds – Village Hotel Leeds South – 13th          Durham – Lumley Castle Hotel – 13th (3.30)
Derby – Airport Hilton Hotel – 14th Birmingham – The Hippodrome – 19th
Bristol – Almondsbury Interchange – 19th (3.30)           London – Radisson Blu – 20th (3.30)
Kings Langley – Kings House – 21st              Glasgow – Highlander House – 26th
Southampton – St Mary’s Stadium – 27th  

Lifecycle members can book places via the members’ section of the website.

If you are not currently a member then e-mail [email protected] with your chosen event(s), venue and delegate names.