The hurdles to overcome when exiting tax avoidance schemes

Taxpayers and their advisers can sometimes think that everyone and everything can be conspiring against them.  Having been introduced to a tax avoidance scheme with promises of “tax-free cash”, getting out of such a scheme may not always be that straightforward.

With the “Loan Charge” assessing all outstanding loans for PAYE and NIC purposes in 2018/2019, HMRC may not have the resources to deal with queries.  But if the decision is taken to explore your options or even a stage further to engage with HMRC to seek a Settlement, the last thing you want is to have hurdles put in your way.

In a typical tax avoidance scheme now caught by the Loan Charge, an owner-managed business will have contributed to a structure, often a trust. The Trust, in his example, then makes an interest-free loan back to the owner-managers themselves. HMRC calls this arrangement “disguised remuneration.”

What might those hurdles be?

1. The scheme provider has ceased to trade. The scheme provider was the instigator/the introducer and acted as a middleman and would have all the paperwork.
2. The Trust no longer exits. The Trust is a key component and would also have most (if not all) of the paperwork.
3. The owner-managers have fallen out and no longer communicate with each other. Their participation in the scheme together is like a red rag to a bull and may still be a bone of intense contention between them.
4. The company (that made the contributions) no longer exists. Again, it is highly likely that some (if not all) of the paperwork that the company held has been destroyed following its liquidation.
5. One (or more) of the participating owner-managers has passed away. Any Executor may find that there is a liability to HMRC from the Estate for tax and/or NIC.

I have found none of the above factors to prevent a Settlement being achieved.  The information is out there, somewhere.

So, if you or your clients want to exit a tax avoidance scheme but are facing any of the above hurdles, please contact me on 07979 313 010 or at paul@pmc.tax, and together, we will find a solution.