HM REVENUE & CUSTOMS has stepped up its campaign against tax avoidance, by issuing a document warning of the risks of entering into contrived schemes.
The four-page leaflet entitled Tempted by Tax Avoidance? warns “anyone tempted to use a tax avoidance scheme should think very carefully about the costs, the disruption caused by having to deal with HMRC enquiries and potentially lengthy litigation”.
“There is a big difference between using tax reliefs and allowances in the way in which they are intended to be used, and trying to bend the rules to avoid tax,” it adds.
The document goes on to detail the characteristics of tax avoidance strategies and uses case studies to illustrate the dangers of being involved in tax avoidance.
The circulation of the leaflet marks a ramping-up of the taxman’s aggressive stance against would-be tax avoiders, according to Kinetic Partners member Gary Ashford.
“This leaflet is part of their strategy to contact those persons direct and head off some of their appetite to enter into such arrangements,” he said.
“In recent months we have seen HMRC taking a very aggressive stance on tax avoidance schemes, to the point where we are seeing them open criminal investigations and Code of Practice 9 Contractual Disclosure Facility investigations into individuals on the basis that the scheme arrangements amount to potential fraud”.
Watt Busfield Tax Investigations founding partner Rebecca Busfield said she was “sure this will be quite effective in deterring tax payers and is useful in that it covers lots of the practical consequences of schemes failing”, with the caveat that “it’s very one-sided”.
“There are many who believe that tax avoidance schemes can still work if implemented correctly,” she added.
“HMRC do not win all cases that go to court. Each needs to be considered on a case by case basis, with reference to each specific tax payer.”
A spokesman for HMRC said the department “wants people to be aware of the consequences of using a tax avoidance scheme; at the very minimum they will face an enquiry, potential litigation, and uncertainty over the outcome they may face as a result”.
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