HMRC and ASA join forces to fight tax avoidance
HMRC and the Advertising Standards Authority (ASA) launched a joint initiative designed to cut out dishonest marketing by promoters of tax avoidance schemes.
The laudable aim of the joint action on tax scheme promoters is to “protect people from being presented with misleading adverts which may tempt them into tax avoidance”.
The ASA pack includes an enforcement notice that comes into effect from 31 January 2021. The ASA will use this to demand the removal of advertisements for tax avoidance schemes that are believed to incite lawbreaking.
Helpfully, the document includes examples of the kind of assurances that could be challenged. These are:
- “HMRC friendly”
- “fully compliant with HMRC legislation”
- “100% HMRC compliant”.
Instead, it is suggested that ads should include clear statements regarding the tax implications and risks of entering into schemes, including the risk of HMRC challenge and explanations of relevant legislation. It goes without saying that few scheme promoters would wish to pay for adverts including these kinds of negatives.
For promoters who fail to heed this advice, immediate sanctions include having their paid advertising removed from search engines followed up by compliance action, which can include a referral to the local authority trading standards officer. Many may conclude that this is relatively tame, compared to the powers available to HMRC, which could ultimately include substantial fines and imprisonment.
Marketed tax avoidance schemes
For its part HMRC published a report on Use of marketed tax avoidance schemes in the UK. This report analyses and quantifies the tax avoidance market and sets out details regarding promoters. Readers may be surprised to learn that all of this effort is designed to counteract no more than 20 to 30 scheme promoters in the UK.
Warning to punters
As a third strand of this war on marketed tax schemes, HMRC launched a new awareness campaign to educate contractors about the pitfalls of tax avoidance schemes.
The broad thrust of this blitz is to persuade those who might be tempted to buy into schemes sold as sure-fire routes to saving taxes that the solution presented may be very bad news for the taxpayer.
The campaign looks as if it has been prepared by psychologists with the specific intention of scaring people or, at the very least, introducing a degree of uncertainty.
It is built on three steps:
The taglines of the HMRC campaign are:
- Stop: Don’t sign anything that you are uncomfortable with or don’t understand
- Challenge: Check for warning signs. If you’re unsure, seek independent professional advice
- Protect: If you think you have been offered a tax avoidance scheme, report it to HMRC. Or if you need help getting out of one, contact HMRC.
This guidance is consolidated by personal stories about a single-parent nurse and an IT project manager, both of whom were landed with unexpected tax liabilities long after entering into arrangements that they had been assured were legitimate and effective.
In addition, there is a link to an online form and phoneline (0800 788 887) that individuals can report suspicious tax schemes directly to HMRC – and remain if they wish.
These documents form part of a long-term strategy to reduce abusive tax avoidance through mass-marketed schemes that prove to be ineffective.
More specifically, they pick up on the new strategy for tackling promoters of such schemes, inopportunely published on 19 March 2020 just when the country’s collective mind was concentrated on the arrival of a global pandemic.
Since then, the government announced a further package of measures to tackle promoters, on which it plans to consult in Spring 2021.
Missing the point
While few would dispute the value of saving those who are persuaded to reduce their tax liabilities by using tax schemes of dubious merit, the real high rollers are not reeled in via advertisements.
The big tax cases in this area involve the likes of UBS and Deutsche Bank. Companies of this type will retain eminent barristers, top firms of accountants and make use of their internal resources to develop schemes.
Organisations that might be swept up in the excitement of an advertising promotion from largely unqualified and unmonitored salesman pushing plans that come off-the-shelf, will generally be small fry, possibly saving millions but only a tiny percentage of the amounts in the schemes involving the big multinationals.
An add on
HMRC’s real thrust is to cut out abusive tax avoidance by changing laws and actively pursuing those that they believe have become involved in tax evasion or schemes that are ineffective, either in principle or through faulty implementation.
In that light, preventing the promotion of purportedly illegal schemes is little more than a cosmetic change, which is unlikely to have a major impact.
As we are so often told, the best measure of such tax saving schemes is that if they sound too good to be true, they probably are. Given the knowledge that HMRC is likely to review the arrangements with a jaundiced eye, anyone who is willing to take their chances with questionable plans would need to be careful, brave or stupid.