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HMRC warns against bogus tax avoidance schemes

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Disguised as legitimate financial planning, the growing number of tax avoidance schemes has led HMRC to take action to warn taxpayers.

20th May 2022
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In a bid to educate businesses and individuals on the dangers of tax avoidance schemes, HMRC has released new guidance on how to better identify dubious promoters. Highlighting HMRC’s commitment to taking a more aggressive approach to such schemes, the guidance includes examples of common claims made by the promoters.

HMRC reports that the department has seen a growing number of avoidance schemes and arrangements, marketing themselves to potential users “as wealth management products or dressed up as exciting investment opportunities”.

Yet, while the original pitch made by such promoters may seem intriguing, HMRC warns that this guise only serves as a cover to reduce the amount of tax and national insurance contributions on your income by using “contrived or artificial transactions that serve little or no commercial purpose other than to produce a tax advantage”.

Underhanded tactics

In order to better protect individuals and businesses from falling for these predatory schemes, HMRC has collated some of the more common marketing tactics used by these promoters. 

While the promises may seem inviting, HMRC was quick to remind readers of the following: “Some people who entered into tax avoidance schemes have ended up paying far more tax than they would have if they had not entered the scheme in the first place. And many are now getting out of tax avoidance and putting the past behind them.”

Listing a range of marketing strategies, HMRC noted that many tax avoidance promoters rely heavily on snappy statements that lack any real credibility and are often misleading.

Some of the examples HMRC included in the report were:

  • The scheme is not disclosable to HMRC and leading Tax Counsel (QC) have agreed this
  • The scheme has been disclosed and therefore you cannot be penalised
  • We have been offering these schemes for years and have not been challenged
  • You can receive tax-free payments that are compliant with tax law
  • We have won all previous court cases in relation to these arrangements
  • HMRC will write you a few letters and then give up and go away
  • The arrangements are recognised by HMRC as not an avoidance scheme
  • We have a successful track record of implementation.

Clamping down

HMRC’s new guidance is another step in their recent efforts to target tax avoidance wrongdoers more aggressively.

In an article last month, AccountingWEB reported on the department’s first step in their “name and shame” approach by alerting users on their site to the underhanded dealings of Absolute Outsourcing and Purple Pay Limited, two tax avoidance promoters whose tactics could potentially land unsuspecting users with a hefty tax bill.

This renewed crackdown on promoters has stemmed from Chancellor Rishi Sunak’s focus on tax evasion during his 2021 Autumn Budget, in order to rejuvenate a pandemic-battered economy. 

Within said budget, a £292m war chest was set aside by the department to cover the next three years in an attempt to tackle tax avoidance and evasion, with promoters being a target of specific interest. 

Rounding off the report, HMRC reminded readers to not be fooled by such statements: “If something looks too good to be true, it probably is.”

HMRC also repeated its commitment to stamping out problematic schemes. “We are relentless in tracking down and countering tax avoidance – and you need to be aware of the pitfalls.”

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