The forgotten liabilities of tax avoidance schemes

Tax avoidance has been around now for 30 years.  In all that time, some taxpayers have chosen to settle with HMRC, others have not.  Over time, these can become forgotten liabilities.

For those who have not settled, where does this leave us today?

HMRC’s Litigation and Settlement Strategy

HMRC introduced the Disclosure of Tax Avoidance schemes (DOTAS) and sought information and documentation from both the scheme promoters and scheme participants.  This is still on-going where there are new variants are being discovered.

Participants (taxpayers) were investigated and assessments raised.  Accelerated Payment Notices and Follower Notices were issued to deny any tax advantage with no right of appeal.   Some schemes were litigated in Court with mixed success.

Further legislation has been introduced, with some being retrospective in nature.

You might think that tax avoidance was no longer around.  Wrong.  Wrong on a number of counts.

HMRC are still in pursuit 

The plethora of schemes and their variants has increased over the years.  Whilst some schemes operated solely in the UK, some schemes were created in sunnier climes.  Others were subsequently transferred overseas.

To my own knowledge, HMRC are still pursuing taxpayers who have participated in film schemes, EBTs and EFRBs.

What is HMRC looking  for?

Money.  And closure.

Money in the form of taxes to pay the forgotten liabilities (and possibly NIC which is strictly not a tax), plus interest and potentially a penalty.  The most frequent taxes are income tax, corporation tax and inheritance tax.

Closure either by a contract settlement or assessment.  HMRC also needs to move on.

So is it game over?

Its hardly a game although some taxpayers can continue to be somewhat cavalier in their attitude to tax avoidance.  Or they might choose to assume the ostrich position.  But all this can come at a cost.

For example, where a company has contributed into an EBT and subsequently advanced a loan to a Director, there will be no closure or certainty in either taxpayer’s file.  This can prevent difficulties if the company is up for sale and the Director wants to retire to sunnier climes.

Don’t forget the nagging or irritation it can bring too.  This can be a cost that is too great to bear any longer.

Do you want certainty in your tax affairs?

Just paying whatever HMRC is demanding does not always bring closure.  HMRC invariably will be seeking a Settlement Agreement to draw the mater to a close.  Until the Settlement Agreement is matched to the payment by HMRC, there is no certainty.  It is not “game over”.

Help is at hand

If you have a matter that you wish to discuss, please call me on 07979 313 010 or email me at paul@pmc.tax for a free no obligation consultation.

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