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HMRC and tax advisers flag avoidance risk

5th Nov 2014
Freelance tax writer
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HMRC has published a list of ten things that a tax avoidance scheme promoter “won’t always tell you”, as the government seeks to highlight the “dangers” that people face when they sign up to a scheme.

“We are firmly on the side of the vast majority of taxpayers who play by the rules”, financial secretary David Gauke told an HMRC stakeholder conference this morning. The government had taken steps to clamp down on the “selfish minority” who practise avoidance.

“As a result, tax avoidance is now very high risk,” Gauke said. “On top of a substantial fee to join a scheme that will almost certainly fail a challenge by HMRC, tax avoiders will also have to pay the tax they dodged, plus interest and penalties.”

HMRC's list, which supplements guidance set out in a leaflet “Tempted by tax avoidance?” first published last year, tells taxpayers that a promoter will not always tell the taxpayer that:

  • “most schemes don't work,
  • it could cost you more than you bargained for,
  • you may have significant legal fees to pay,
  • you could face criminal conviction,
  • you could face publicity as a tax avoider,
  • your scheme is never HMRC approved,
  • you could be marked out as a high-risk taxpayer,
  • HMRC is likely to beat your scheme in court,
  • the risk is normally all your own, and
  • you’ll have to pay the tax up front anyway”.

HMRC has begun to write to promoters potentially caught by new high-risk promoters rules. “If they don’t change their behaviour, HMRC could name them publically and fines might be imposed of up to £1m,” the department said.

A tax information and impact note on measures now set out in Finance Act 2014, allowing HMRC to issue conduct notices to promoters and monitor those who breach a conduct notice, could result in about 20 businesses being “designated”.

HMRC said today that the measures targeted “the small minority of tax advisers who are persistently uncooperative and opaque in their dealings with HMRC”.

‘Serious stuff for all involved’

HMRC’s announcement comes a day after tax barrister Jolyon Maugham invited fellow tax professionals to help him to develop a set of diagnostic criteria, or “badges of tax risk”, that a taxpayer might use to self-assess the risk of a proposed transaction.

“It's beyond doubt that many taxpayers find themselves involved, quite unwittingly, in tax transactions with a higher risk profile than they would choose,” Maugham told AccountingWEB.

“This has profound consequences for the exchequer – it leads to a substantial loss of tax – and for the taxpayer too. I am aware of marriages breaking down, taxpayers pushed into bankruptcy and even suicides. It's serious stuff for all involved, and I applaud all attempts to address the problem, including [today’s announcement].”

But HMRC would acknowledge that it is “not best placed” address this issue, Maugham suggested. He was “very keen” for people to comment on his proposal and engage in the debate.

“Anything HMRC says is susceptible to the response: 'Well, they would say that, wouldn't they?’ I think initiatives coming from taxpayer community are likely to be more successful, which is why I've launched the 'Badges of Tax Risk' project,” he added.

Maugham’s draft checklist focus on factors that indicate high tax risk. “In tax, as with other things, there is rarely such a thing as a free lunch,” he wrote. “The difference between tax efficient transactions and tax avoidance transactions is very often whether Parliament intended the tax result your transaction delivers.”

Several contributors have welcomed his initiative and some have suggested changes. Rebecca Benneyworth said a checklist could be “a very useful tool to support our clients”.

Tax campaigner Richard Murphy suggested the addition of a series of questions designed to help the taxpayer assess the suitability of the tax adviser. “We may not all be tax experts but we do have the ability to appraise those who claim to have that status. Just as some people in life are more risk averse than others, whilst some positively relish taking an aggressive stance on most issues, the same is also true of tax advisers,” he said.

Last week the Chartered Institute of Taxation argued, in response to a consultation on strengthening the disclosure of tax avoidance schemes (DOTAS) regime, that the link between accelerated payment notices and DOTAS resulted in “an increased incentive for unscrupulous promoters to try to circumvent DOTAS … and thereby mislead potential users of schemes”.

The CIOT added: “This therefore becomes very much a public protection issue, as well as causing problems for mainstream advisers whose clients are being targeted.”

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Replies (10)

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By Trethi Teg
05th Nov 2014 15:29

Name the Boys

If Jolyon Maugham believes that some QC's provide incompetent advice or advice that they know is incorrect then he should have the courage to name them. They can hardly sue him if he's correct.

It would mean that unsuspecting clients would then be able to see who is offering opinions and they could avoid tax arrangements with the Houses that pay "the Boys". 

Wouldn't that be a great service in the cause of closing down tax avoidance. Far better than pontificating for hours on end on a "blog"

Rather than do that he hides behind "client confidentiality".

Another self publicist I am afraid, advancing his career by jumping on the Gauke tax avoidance bandwagon.

Come on Jolyon  - name and shame!



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Replying to David Gordon FCCA:
By Maugham
05th Nov 2014 17:55

Naming the Boys

But naming them would deny me the pleasure I get from pontificating for hours on a "blog" (or even a blog). You have to remember I'm a barrister: it's what we do for fun.

Seriously, I would rather like to name them. But that would require my clients to waive confidentiality (otherwise I would be - and rightly - both sued and struck off). And that would, in turn, require them to say, in effect, 'this tax scheme that I've participated in just doesn't work'. And I can see that they might well be unwilling to do that. So, sadly, there are very real impediments in the way of what it would seem both you and I would like to see happen.

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By ShirleyM
06th Nov 2014 08:52

I'm pleased about this

Some of the schemes are so artificial they can only be described as evasion. It was clear that in the event of an investigation that some of these schemes would fail, and fail spectacularly.

I can't understand why advisers (and others) are allowed to make money from promoting illegal evasion. They should be prosecuted for promoting illegal actions intended to defraud the taxpayer.

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By mikefleming3028
06th Nov 2014 09:46

todays top story


Leaked tax documents revealing Luxembourg tax rulings for more than 340 multinationals have been published after a six-month investigation by the International Consortium of Investigative Journalists (ICIJ), a global network based in Washington DC.

HMRC ‘steps up’ scrutiny of largest businesses


Judging from the  above two articles  published today on Accounting Web it looks to me as though HMRC have their collective fingers in the wrong holes in the wrong dyke[***] in the wrong Country. As for PWC`s "involvement" what a surprise!!!   

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By jonnieboy
06th Nov 2014 11:13

It's easy to be smug but...

Legislation not preventing sites like this... is just shameful.  Points like

•Efficient tax planning
•Free to join, free to leave
•100% compliant
•A UK based business

I think it's easy for tax professionals to sit back and blame the greed of people who get involved in these schemes.  My guess would be that the promotor of this scheme claims it is not notifiable under DOTAS either.  And, as a contractor in a high-risk sector, I receive several e-mails from various promotors of similar schemes every week.

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By Maugham
06th Nov 2014 11:22


That, I can promise you, is not something I have been doing. You might want to look at the various piece on on The Morality of Tax Avoidance. I think there's absolutely a problem with that which you describe.


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Replying to DWM:
By jonnieboy
10th Nov 2014 15:27


I do hope I haven't caused any offence... I certainly never intended to target any individuals with my comment about smugness - it's just as a regular "lurker" on AccountingWeb, it's a trend that I have noticed...

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By pauljohnston
10th Nov 2014 15:19

“most schemes don't work,'

Yep if this was true no one would undertake them.

It is sad that HMRC try this spin regularly. 

One of my clients with an income from a trade which is well under £25k said " I have no sympathy with HMRC, they make the law if they dont like what some taxpayers are doing, HMRC should change it"


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By Maugham
10th Nov 2014 16:28


No offence taken (I promise). There is a lot of smugness around, it's not an attractive quality, I am prone to it, and you can consider yourself to be performing a valuable community service by pointing it out wherever you see it.

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