Number of tax plans drops to record low

THE NUMBER of new tax avoidance schemes has hit a record low since records began ten years ago, according to figures released by law firm Pinsent Masons.

Fewer tax planning schemes were reported to HM Revenue & Customs in the year to September 2013 than in any year since 2004, when the Disclosure of Tax Avoidance Schemes (DOTAS) legislation became active, making disclosure compulsory.

More than a third of available tax products were stopped between September 2012 and 2013, leaving the number still operational at 77. In 2004/05, there had been 587 schemes on offer.

The DOTAS programme was introduced as an early warning system to help HMRC identify new tax avoidance schemes as they are created or marketed, in order to review whether changes are needed to existing tax legislation and if necessary take action against the users and promoters of any schemes they deem to be abusive.

Pinsent Masons head of tax Jason Collins said: “The figures show that HMRC is taking a tougher stance on tax avoidance and winning the battle, if not the war, to eliminate elaborate tax schemes. They have been successful in dissuading the bigger accountancy firms from creating new tax avoidance schemes with many major professional services firms now avoiding the more extreme forms of tax planning as it carries with it a reputational risk.

“Companies and high-earning tax payers may still look for new ways to minimise their tax bill but the fact that there were just a fraction of new schemes last year compared to previous years suggests that HMRC is doing a better job at using its understanding of existing avoidance schemes to “police” the promoters and close loopholes in the law – often before they can be fully exploited.”