HMRC reassesses tax avoidance hallmarks

THE TAXMAN has been forced to rethink plans to include non-abusive tax schemes in draft laws on tax avoidance hallmarks after tax advisers criticised HMRC for “casting the net too wide” over the amount of arrangements that are classed as tax avoidance schemes.

HMRC carried out a consultation  from July to September last year, sparking fears from the tax profession as to whether regular loan trusts, discounted gift trusts and lifestyle trusts would be included within the disclosure of tax avoidance schemes.

The government department eased public by confirming that it will review the schemes that have been classed as tax avoidance plans.

“The government does not seek to discourage the legitimate use of reliefs and it is not intended that non-abusive arrangements should be caught,” reads the consultation document. “The government will consider whether clarification is required in these areas to confirm that non-abusive arrangements do not need to be disclosed.”

Paul Noble, tax director at Pinsent Masons, has praised HMRC for realising the law is “drafted too widely”. 

“I think it is a good move for them to reconsider, because it shows that they have listened to the concerns. If it catches things that are outside of that, then it is outside of its purpose,” he said. 

A spokesperson for HMRC said the changes will clamp down on aggressive tax avoidance schemes.

“The government has, following consultation, strengthened the descriptions (hallmarks) of schemes which must be disclosed to HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) rules.”

“The changes will make it harder for would-be promoters and users of avoidance schemes to go undetected and unchallenged. This is part of a package of measures to strengthen the DOTAS regime announced at the March 2015 Budget, and demonstrates the government’s commitment to ensuring that the DOTAS regime continues to keep pace with the current avoidance market.”

Related reading