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HMRC: tougher sanctions for High Risk Tax Schemes.

An HMRC consultation concerning measures to rein in “high risk” promoters of tax avoidance schemes would require users of such schemes to amend their tax returns accordingly, and those who fail to satisfy HMRC that they had a reasonable basis for not amending their returns in such situations could face a tax-geared penalty.

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“The paper targeting promoters has been on the cards since the March Budget, when Chancellor George Osborne promised consultation around a package of information powers and penalties and to curb high-risk promoters of tax avoidance schemes.”

While few would dispute the need to curb abusive schemes, there are several areas that will be potentially controversial, such as including a higher threshold for reasonable excuse and reasonable care for both advisers and taxpayers in such high risk cases

Since the Spring Budget there have been a steady flow of campaigns and statement by anti-avoidance tax campaigners, the Commons public accounts committee, ministers and HMRC all highlighting the amount of abuse that is rife. One such article (in The Times) in May alleged there were around 200 tax advisers and lawyers taking advantage of offshore secrecy to help super-wealthy clients avoid tax.

HMRC’s document sets out how it would like to categorise specialist advisers who promote schemes under the cloak of secrecy as “high risk”. These factors could include:

  • the promoter’s business consists of mainly of designing, marketing or implementing tax-saving products.
  • the products involve degrees of complexity and artificiality to achieve results not intended by Parliament, or have a limited chance of working due to unrealistic legal interpretations or poor implementation
  • the economic benefit of the product appears not to be commensurate
  • with the risk.

The second main proposal in the consultation document concerns litigation. Under the present scheme, the tribunal can only apply rules to cases that have been formally notified.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“Under the new proposals, where a taxpayer is under investigation for an avoidance scheme that fails in another party’s litigation, HMRC is proposing that the taxpayers concerned should accept that the judgment applies to them, advise HMRC of the tax advantage they had gained under the scheme and amend their return.”

In addition to being covered by the new designation regime, tax scheme promoters will find it harder to hide behind “reasonable excuse” and “reasonable care” defences because they had sought legal advice on the feasibility of their arrangements. 

The consultation period lasts until early October with the government planning to bring forward legislation for the Finance Bill 2014 - possibly in the shape of draft clauses by early December.

If you need any help and advice for your business on Partnership Tax, Corporation Tax or you need to keep abreast of changes in legislation and how it could impinge upon your business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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