Having been granted an increase in specialist funding, HMRC is offering the participants of certain tax avoidance schemes the chance to settle their tax liabilities via agreement, rather than facing litigation.
In a news release this week, HMRC announced that it has stepped up its efforts to clamp down on the increasing number of aggressive tax avoidance schemes operating in the UK – some of which are marketed to the contracting community.
In an effort to save litigation costs, and also to scare participants in unorthodox tax planning schemes to come clean, HMRC says it will update its website with details of future individual ‘settlement opportunities’.
Initial Settlement Opportunities
The initial settlement opportunity has been made to participants in three types of tax planning scheme;
1. Schemes using Generally Accepted Accounting Practice (GAAP) to artificially create losses to save tax for sole traders, individuals or companies in a partnership.
2. Schemes that use film relief rules for production expenses,
3. Schemes that create artificial losses in partnerships via a number of tax reliefs, such as certain capital allowances.
Promoters of tax avoidance schemes are obliged to register details of any new schemes under the DOTAS (Disclosure of Tax Avoidance Schemes) rules.
HMRC only successful at challenging 40 schemes in 12 years
It may be that HMRC has been burnt by recent criticisms of its action against tax avoidance schemes. In November, the National Audit Office found that despite 90 changes to tax legislation over the past 8 years, the number of new tax avoidance vehicles is growing faster than ever. According to DOTAS figures, over one hundred new schemes have been registered in each of the past four years.
Of most interest, perhaps, is the fact that of over 2,000 tax avoidance vehicles registered under DOTAS over the past 12 years, just 40 have been successfully challenged by HMRC. It could be that the latest ‘settlement opportunities’ represent a change of tack for the tax authorities, who now prefer to use the fear of legal action over taking schemes to court, when the latter has been shown to be so ineffective.