In HMRC v Hyrax Resourcing Limited & Bosley Park Limited & Peak Performance Head Office Services Limited [2019] TC07025 the First Tier Tribunal (FTT) found that a contractor loan scheme should have been notified under the Disclosure of Tax Avoidance Schemes (DOTAS) regulations.

The DOTAS regime was introduced in 2004.

  • It keeps HMRC aware of the use of tax avoidance schemes.
  • The onus is on the promoter of a scheme to make a notification to HMRC with penalties of up to £600 per day for failing to do so.

'Hyrax' was a contractor loan scheme  using an EFRBS and was marketed by the respondents from 2014 onwards.

  • They had previously marketed different iterations of the scheme, K2, Cirrus, Hamilton and Penfolds; all of which were notified to HMRC under DOTAS.
  • Scheme users had transferred from one scheme to the next as new iterations were introduced.
  • Hyrax was not notified under DOTAS.
  • The respondents claimed that the Hyrax arrangements did not involve tax avoidance but tax mitigation and relied on a specific exemption for EFRBS.

The FTT found that Hyrax was a notifiable arrangement under the DOTAS rules:

  • The scheme gave, or was expected to give, rise to a tax advantage.
  • The main benefit, which was expected to arise from the arrangement was the obtaining of a tax advantage; there was “no other rational reason why anyone would implement a convoluted and expensive set of arrangements which left them with a legal (if economically unreal) obligation to repay a sum that they would otherwise have received as salary, save for the expected tax advantage”.
  • The fees paid to use the scheme were premium and it was a standardised tax product.
  • Hyrax Resourcing Ltd was the scheme promoter, the other connected respondents were not.

The judge noted that the respondents elected not to serve any evidence nor call any witnesses at the hearing which she felt inferred that the evidence they could have given would not have assisted their case. She also noted that, whilst the potential penalties were “enormous”, the respondents had not yet been penalised, and “may never be penalised”.


What happens next remains to be seen, the decision is not appealable but presumably Hyrax Resourcing will now be required to provide HMRC with a list of everyone who has implemented the scheme just in time for the Disguised Remuneration loan charge on 5 April 2019. 

Links to our guides:

DOTAS: Disclosure of Tax Avoidance Schemes
Rules for declaring use of tax schemes

Disguised Remuneration
A guide to everything you need to know about disguised remuneration schemes, the loan charge, and how to reach a settlement with HMRC.

Comment from 2014:
K2 Jimmy Carr: has tax avoidance gone too far?

External links:

HMRC v Hyrax Resourcing Limited & Others [2019] TC07025 

HMRC spotlights on tax avoidance schemes