The latest figures from HM Revenue & Customs on the number of disclosures made on direct tax show that 346 disclosures were made between 1 April 2006 and 31 March 2007.

This is a significant reduction on earlier periods, indicating that fewer schemes are being designed. The previous year saw 607 disclosures and 503 were made in 2004/2005.

Advisers said HMRC would be pleased about the way the scheme is working, even though the taxman has previously highlighted a small number of rogue firms attempting to ignore the regime.

‘We’re settling into a steady state. There won’t be huge numbers to give the postman the need for overtime,’ said PricewaterhouseCoopers tax partner John Whiting.

Grant Thornton’s head of UK tax Francesca Lagerberg said the scheme had been ‘tightened’, and that there was a trend of caution among advisers.

‘With the new regime it takes people time to get used to it,’ she said.But although the scheme has settled down, there has been a spike over the past six months on the disclosure of ‘hallmark’ schemes.

A revision of the disclosure rules from 1 August 2006 widened the scope of the regime to include the whole of income tax, corporation tax and capital gains tax.

‘Hallmark’ schemes then required disclosure, defined by HMRC as schemes associated with a hallmark of tax avoidance designated in the relevant legislation.

Advisers posted 125 disclosures in the past eight months to 31 March 2007 under the revision, compared with 108 disclosures across the previous ten months.
Whiting said there were two main reasons for the recent spike.

Advisers knew that HMRC was lining up a revision of the regime, and tax professionals were also inundated with two complex Finance acts during 2005 and 2006.

‘Advisers have got the hang of the hallmarks. There was some holding back due to the Finance Act and advisers now understand the wider scope of the regime. Lots of scheme dreaming up has stopped,’ Whiting said.

In the 2007 finance bill the government said it would introduce legislation to stop non-compliance with the disclosure regime through tougher powers. These will include the ability to compel firms to provide information via an application to the special commissioners.