HMRC collected nearly half a billion pounds through an enhanced campaign against tax avoidance schemes last year, as contrived tax structures continues to be a top priority for the government department.
According to international law firm Pinsent Masons, HMRC collected an additional £494m in income tax between 2014 and 2015 through investigations into tax avoidance schemes.
Crackdown against celebrities
Since 2012, HMRC has been on a targeted campaign against some of the UK’s most well-known public figures who have used tax avoidance schemes, including actors, musicians, sports stars and comedians.
In 2014 the taxman launched its Counter Avoidance Directorate, with the primary objective of cracking down on the promotion and use of avoidance schemes. The directorate also played a key role in HMRC clawing back £154m in capital gains tax last year.
A recent HMRC survey of more than 1,000 people found that 63% believed that use of tax avoidance schemes is still ‘widespread’, while 61% believed that it was ‘never acceptable’ to make use of such schemes.
Almost two-fifths of participants (37%) said that they felt HMRC is putting ‘too little effort’ into reducing the use of tax avoidance schemes.
Public anger towards tax avoiders peaked earlier this year, as the UK reacted to the news of Google’s £130m settlement with HMRC over ten years’ worth of back taxes.
HMRC should not abuse its powers
Since the ‘Google deal’ HMRC has won a number of court battles against tax avoidance schemes.
In April the Supreme Court brought an end to a lengthy legal battle between HMRC and film tax avoidance scheme Eclipse 35, ruling in favour of the taxman and protecting £117m of public money.
Last month HMRC also claimed a ‘significant victory’ against BNP Paribas-held firm Fidex and its project Zephyr avoidance scheme. HMRC claim the scheme had £17.2m of UK tax at stake.
Paul Noble, tax director at Pinsent Masons said that HMRC will be looking to capitalise on its ‘healthy’ returns from avoidance investigations this year.
“HMRC have been and continue to be granted huge new powers to help them close and clear the many thousands of open avoidance cases,” he said.
“These have included the ability to issue Accelerated Payment Notices (APNs), requiring the payment of disputed tax in advance of any decision on a scheme’s efficacy. In addition powers to retrospectively clamp down on tax matters are increasingly prevalent. It is important that such powers are not abused.”
The ATT had previously expressed concern that the legislation was overly complex and created unnecessary complications within the practical working of the new allowances
Introduced in 2013 to encourage R&D investment, the scheme allows UK businesses to pay only 10% corporation tax on profits derived from any UK or certain EU patents
APNs are issued to individuals and businesses who are suspected of having engaged in tax avoidance, and require full payment of the disputed tax within 90 days
Yet, KPMG’s annual survey shows that the UK is still an attractive place to do business, despite falling in rankings in tax competitiveness and FDI appeal