HMRC have published a research report, ‘Understanding avoidance scheme users’ decision making, customer experience and future compliance intentions when settling their enquiry with HMRC’. 

The research considers why people use tax avoidance schemes, how they find the settlement process, and how it shapes their attitude towards tax avoidance.

The participants in the research gave varied reasons for taking part including benefitting others, reflection and  'closure' on a difficult process and wanting HMRC to hear their story.

Why do people use tax avoidance schemes?

The 20 people surveyed gave the following reasons for participating in avoidance schemes:

  • Personal financial gain.
  • Saving time and effort in running a company: this was specific to contractors.
  • The credibility of scheme introducers including promoters, accountants, peers and friends. None of those surveyed had sought out schemes. Introducers were seen as having specialist knowledge and schemes were regarded as being ‘accredited’ e.g. with DOTAS numbers, and had more credibility.
  • The ‘tax environment’: before 2008 avoidance schemes were seen as being commonplace and more socially acceptable.

What was their experience of the settlement process?

The research categorised scheme users into three categories based on their understanding of and attitudes towards, the scheme, with each having a different experience and approach to settlement.

  • Unaware: They were not aware they were engaging in avoidance and surprised and worried by HMRC challenges. They were more likely to think that they were in the wrong and should take action quickly. They did not fault or criticise HMRC for challenging the status of their scheme.
    • Most likely to be risk-averse and strongly refuse any type of tax planning in future.
  • Justifiers were aware the scheme was ‘on the edge of tax law’ and not surprised by HMRC challenge. They justified the use of the scheme on the grounds it was technically legal and permissible at the time of sign up. They were more likely to try and negotiate better terms, or contest HMRC’s views.
    • Settlement had the greatest impact on this group’s attitudes to tax avoidance. They now saw a change in the tax environment with some seeing avoidance as ‘morally wrong’.
    • This group, in particular, were more wary about government promoted schemes such as the Enterprise Incentive Scheme (EIS) and Individual Savings Accounts (ISAs).
  • Deliberates: those people who actively avoided tax and viewed their scheme as entirely legitimate and justified on the grounds of similar behaviour by big business.
    • Most likely to continue to look for ways to ‘gain tax efficiencies’ and to criticise HMRC. This was especially the case of legislation perceived to be retrospective, which they saw as HMRC ‘moving the goalposts’.

Why did people settle?

  • Personal perceptions of the financial, reputational and emotional costs of a drawn-out settlement process drove some to settle early. Some opted for litigation due to a lack of funds.
  • All claimed to have sought advice from a range of people at the point of HMRC challenge.
    • Spouses, family members and accountants tended to encourage early settlement.
    • Promoters, action groups, legal counsel encouraged users to dispute the settlement.

How did they find the process?

  • Settlement experiences were described as difficult and drawn out with criticisms around disjointed contact with HMRC, inconsistent customer service and lack of clarity.
  • Greater transparency and more tailored customer service were raised as ways to improve the process, including a single point of HMRC contact and details on how figures are calculated.

HMRC conclusions

HMRC aims to use the findings to improve the settlement process and reduce the number of people using tax avoidance schemes and in doing so cut down the number of lengthy tribunal cases. It would do so by:

  • Persuading users through education and communication that tax avoidance is not legitimate.
  • Providing a named, informed HMRC contact at the point of the challenge, to reduce the time taken for individuals to settle and create more opportunities for earlier discussion especially around how, and when, they can pay.
  • Reinforcing in a clear and consistent manner the reputational damage caused by scheme usage and the likely repercussions, over and above the financial consequences, of contesting a settlement.
  • Providing users with access to the information they need to make a decision to settle early by connecting them with named, trusted accountants, or HMRC contacts, and providing more details in initial challenge letters and online. This would also undermine the power of scheme providers and promoters over scheme users.


The number of people surveyed (20) appears low compared to the number of scheme users who have settled their schemes, with over 8,000 for disguised remuneration schemes alone by late 2019. It seems a low response rate was expected and is perhaps indicative of a reluctance from some scheme users to engage with HMRC on any level.

Links to our subscriber guides

Disguised remuneration loan charge
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?

FAQs for Disguised Remuneration Settlements
The terms of each individual scheme are different and therefore the following is intended as general guidance only.

Making a tax disclosure (Digital Disclosure Service)
A practical guide to making a tax disclosure using HMRC's online system.

When a tax inspector calls  
This section has a series of articles that look at policy on tax strategies/avoidance and tax investigation news, including serious fraud and disclosure facilities.

External link

Understanding avoidance scheme users’ decision making, customer experience and future compliance intentions when settling their enquiry with HMRC