Readers may well be familiar with the type of tax avoidance scheme or strategy that features in HMRC's Spotlight 29: "don't fall for it - misleading claims made by tax avoidance scheme promoters."

  • Despite litigation, despite anti-avoidance legislation up until recently a lot of firms have still been active in the sale of tax avoidance products (schemes/strategies).
  • Such schemes are often promoted by a "boutique" based offshore (although Spotlight 28: the GSOP features a scheme generated by a large accountancy firm).
  • Its literature will tell you that HMRC is aware of the scheme and that it is a legitimate planning product.

HMRC would rather people don't fall for these types of scheme because of the extra costs that they create. Typically it will have to open an enquiry into each user and then raise an Accelerated Payment Notice

Spotlight 29 by HMRC

Promoters marketing these avoidance schemes and arrangements use a variety of terms or statements to reassure the potential user that the products they are marketing are acceptable. Such statements are often short and snappy and made without context so could be misleading.

There are a wide variety of claims and statements made but some examples include:

  • these arrangements fall outside the scope of tax avoidance
  • the scheme is not disclosable to HMRC and leading Tax Counsel (QC) have agreed this
  • the scheme has been disclosed and therefore you cannot be penalised
  • we have been offering these schemes for years and have not been challenged
  • you can receive tax-free payments that are compliant with tax law
  • we have won all previous court cases in relation to these arrangements
  • HMRC will write you a few letters and then give up and go away
  • the arrangements are recognised by HMRC as not an avoidance scheme
  • we have a successful track record of implementation
  • leading Tax Counsel have advised that the arrangements are legal and work
  • penalties can’t be applied as you have relied on advice of Tax Counsel
  • you can earn more and mitigate tax and do so using tax efficient structures fully compliant with the law
  • the product is low risk
  • you’re fully insured against any defeat
  • HMRC has approved the scheme - they’ve given it a reference number

HMRC has also published Ten things a promoter of tax avoidance schemes won’t always tell you which are that:

1. Most schemes don’t work
2. It could cost you more than you bargained for
3. You may have significant legal fees to pay
4. You could face criminal conviction
5. You could face publicity as a tax avoider
6. Your scheme is never HMRC approved
7. You could be marked out as a high-risk taxpayer
8. HMRC is likely to beat your scheme in court
9. The risk is normally all your own
10. You’ll have to pay the tax up front anyway

 Links: HMRC Spotlight 29