A Word in Your Ear

HMRC pre-emptive strike on tax avoiders

In what is believed to be an unprecedented move, HMRC has begun issuing letters to 1,500 people who have signed up to one particular tax avoidance scheme. Although the recipients of the correspondence are not known it is not thought that they are part of the mega-rich set but it may be that some well-known names could be among their number.

The letters are seen as a pre-emptive strike by the Revenue before any legal challenge is mounted against the, as yet, unknown scheme, and also a response to the criticism it recently received from the National Audit Office over a backlog of 41,000 aggressive tax avoidance cases involving individuals and small businesses.

Four different versions of the letter are in circulation with one version stating, "You are in the small minority of people who have made the deliberate choice to avoid tax. We focus our resources on this small minority. The choice that you have made changes the way we view your tax affairs.

"Our Specialist Investigations Unit will be carrying out a full investigation into this scheme and they will open an enquiry into your tax affairs."
The correspondence goes on to warn that the consequences of using the scheme may be tax arrears, interest and possibly penalties. For those who have had the wind sufficiently put up them the letters provide contact and payment details should they wish to exit the scheme post haste and stump up the tax.

HMRC explained, “The letters are designed specifically to get those using a marketed avoidance scheme to contact us and settle up. We are acting on behalf of the vast majority of people who don't try to get around the rules. We are cracking down hard on tax dodging.”

Chas Roy-Chowdhury, Head of Taxation at the Association of Chartered Certified Accountants, told the BBC that the letters were a good way of HMRC attempting to reduce the numbers of these scheme users to “more manageable levels” and that the warning would “make people think twice.” He also said, “I hope it does bring down the numbers and restore some faith in the tax system.”