1,200 of ways to avoid tax… Busted!
On Tuesday, thousands of UK tax payers who have invested in tax-saving schemes over the past decade were told that they will almost certainly have to repay all the tax they have saved; currently estimated to be billions of pounds. This is the latest step in HMRC's continued crackdown on tax avoidance, and affects anyone who has invested in one of a list of 1,200 avoidance schemes published by HMRC.
HMRC’s list provides enough information (unique Scheme Reference Numbers which are also filled out on tax returns) to allow the tax-payers involved in the 1,200 schemes to identify whether they are liable. It will also enable those considering such schemes in future to make an informed decision as to the reliability of their possible tax savings. Those who have invested in schemes on the list will, as a result of the legislation expected in August, receive demands from HMRC to return the disputed tax as accelerated payments. This money will be held in escrow until the resolution of the court case scheduled for early 2015, and will only be returned to investors in the case of an HMRC defeat. This is likely to affect 33,000 people over the next two years and those who are identified will be given 90 days to pay their liability.
Some stand to lose more reputably than financially. Every day there appear to be new revelations about celebrities avoiding tax payments, with Gary Barlow and his Take That bandmates publically embarressed recently amid claims that Mr Barlow should hand back his OBE. David Beckham and Katie Melua are the latest to be exposed as taking advantage of the schemes and are already being strongly criticised, especially given Ms Melua’s previous remarks opposing tax avoidance.
What is important to remember is that those who have used the schemes have not broken the law. While accusations of immorality and hypocrisy are perhaps up for debate, most of the listed schemes were pre-approved by HMRC and so the investors’ actions were completely legal. It is therefore highly controversial that HMRC are going after tax saved in the past, since it sheds uncertainty on a number of wholly legitimate tax planning strategies used today. The core issue is that when tax avoidance becomes excessively aggressive it can quite easily begin to look like (or even turn into) evasion, which is of course an offence.
WSM strongly recommend that any tax-saving plan is discussed with your independent qualified tax advisor before getting involved. We can advise on a number of safe and legitimate tax planning strategies which ensure that you are only paying your fair share of tax – no more and no less. If you would like to hear more, get in touch with our team on 020 8545 7600.