In Anthony Ashbolt and Simon Arundell v HMRC & anor [2020] BTC 17, an application for judicial review over a decision that allowed HMRC to issue search and seizure warrants in respect of financial advisers who used a disguised remuneration scheme was denied. HMRC had good reason to issue the warrants due to the risk that that relevant evidence might be destroyed, concealed, fabricated, or that collusion might take place between the suspects and/or the scheme promoters.

  • The taxpayers and their companies had been under HMRC investigation as Promoters of Tax Avoidance schemes following a Channel 4 broadcast. The 'Dispatches' programme entitled “How the Rich Avoid Tax” caught suspects on camera promoting tax avoidance via loan-trust schemes.
  • HMRC's enquiries into the directors use of the schemes moved into a criminal investigation. They were suspected of offences of fraud by false representation and cheating the public revenue. It then resorted to the issue of search and seizure warrants following earlier failed attempts at obtaining information.
  • The claimants used tax schemes promoted by Baxendale Walker Limited Liability Partnership (LLP) (or its successor Buckingham Wealth LLP). These involved the setting up of a remuneration trust known as the Self-Employed Remuneration Trust (SERT) and Corporation Remuneration Trust (CRT) respectively. Following the introduction of the Disguised Remuneration Loan Charge, the claimants used another scheme promoted by Baxendale Walker LLP that sought to 'rebrand' the purported loans as something that falls outside the scope of Income Tax and the new loan charge. The rebranding gave rise to a belief by HMRC that criminality had occurred.
  • The investigation of the tax schemes turned into a criminal investigation only after documents (identified as 'Fiduciary Receipts Agreements', or 'FRAs') believed to be false and designed to mislead, were submitted by the claimants (and other suspects) and led to an evasion referral within HMRC.
    • The FRAs subsequently submitted to HMRC were documents "on which they have knowingly made false representations in order to circumvent legislation brought in to make loans received through these types of scheme taxable. The total estimated amount of tax evaded by the suspects [the claimants and other individual taxpayer users] is believed to be £3,018,000."
    • In its submissions to the court, HMRC explained that "what is in truth taxable income and was previously misdescribed as a purported loan is now being called a 'fiduciary arrangement' or similar. This investigation concerns attempts, through the submission of fraudulent documentation [the FRAs and Memorandum of Fiduciary Receipts], to retrospectively re-describe the purported loans as fiduciary receipts, in doing so evading the tax which is to become due under the loan charge."

Search and seize warrants had been issued by the Crown court which was satisfied that there were reasonable grounds for suspecting that an indictable offence had been committed and that documents could have been destroyed and other documents fabricated.

The High Court held that the warrants were lawfully issued and the claim for judicial review was dismissed.

Links

Promoters of Tax Avoidance Schemes
Who is a Promoter? What are the Promoters of Tax Avoidance Scheme rules?  What does this mean for promoters, intermediaries and clients?

Disguised Remuneration Zone
What is disguised remuneration? How can I settle disguised remuneration, EBT or contractor loans with HMRC? What are the disguised remuneration settlement terms?

Disguised Remuneration Loan Charge
When do the loan charge and disguised remuneration rules apply?

HMRC tracks tax scheme promoters
In Qubic Tax and others v HMRC [2020] TC7701, HMRC successfully made information requests on tax advisers selling and engaging in tax avoidance schemes in order to check on commission payments made to introducers and the validity of the tax schemes.

External links

Anthony Ashbolt and Simon Arundell v R & C Commrs [2020] BTC 17

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