Avoidance Scheme Promoters Under Fire

This Monday saw HMRC lay siege to promoters of abusive and aggressive tax avoidance schemes by launching its consultation document, 'Lifting the Lid on Tax Avoidance Schemes'. The document describes measures to improve the information available to HMRC and taxpayers about tax avoidance schemes and the associated risks, including proposals to revise and extend the Disclosure of Tax Avoidance Schemes (DOTAS) regime, which requires promoters and users of tax avoidance schemes to provide information to the Revenue.

Some of the proposed new measures include strengthening the DOTAS rules that have been in place since 2004, compelling promoters to disclose their clients to HMRC, penalising those tax advisers who market schemes that have “little or no chance” of working and naming and shaming promoters.

One of the schemes likely to be targeted is the paying of loans in lieu of salaries through shell companies.

In his speech to the Policy Exchange think tank, David Gauke, exchequer secretary to the Treasury, said he was confident that this latest initiative would receive public backing. He compared the promoters of aggressive tax avoidance schemes to cowboy builders and warned them, “Some consultations are an effective cure for insomnia, but this is one that will keep those involved with avoidance awake at night.”

Patrick Stevens, President of the Chartered Institute of Taxation has welcomed the consultation document and Mr Gauke's accompanying speech, saying, “some (promoters) have been playing fast and loose with the disclosure rules and it is understandable that the Government want to target these people – whether they are scheme promoters or their clients”.

Mr Stevens warned that it would be necessary to have safeguards in place so that ordinary tax planning would not be affected. He said, “There is a world of difference between taking advantage of legitimate reliefs, such as those for contributions to a pension fund or charitable donations, in the way intended, and promoting a totally artificial scheme which has no realistic chance of working – and indeed should not work. It is the latter that the Government is, quite rightly, targeting.”

Many advisers however are of the opinion that better tax legislation and a simpler system would address the majority of problems brought about by complex schemes.

Mr Gauke also took a swipe at the public by suggesting that those who pay cash to a cleaner, plumber or gardener are implicit in tax avoidance in the UK. He stated that people obtaining a discount from a plumber for paying cash is 'morally wrong'. This from a man who, in 2006/07, used his parliamentary expenses to ensure that taxpayer's bore the cost of stamp duty of £8,550 on his second home. Although he was cleared of any wrongdoing and did not have to pay any money back, accusations of hypocrisy are not without foundation.

 

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