As the passage of time has shown, participating in tax avoidance schemes is not for the faint hearted. “I wish I had never done that” I hear regularly. Some taxpayers may only participated perhaps once or twice in whatever scheme it is but they have been in a nightmare ever since. And that goes for the advisers too!
What are the legacies?
Uncertainty and cost are the main legacies.
Uncertainty about what?
The future. For some taxpayers the nightmare has been on-going for up to 20 years. Tax avoidance schemes surfaced in the late 1990s. Prior to that, taxpayers took advantage of bespoke tax planning. The problems came with “the one size fits all” approach in the mass marketing of tax avoidance schemes.
Whether or not such schemes are technically sound is now almost irrelevant. Taxpayers have had the first hand experience of HMRC and their never ending questions and demands for the tax that was thought to have been saved.
The UK has had a number of different governments in 20 years and yet the legacies have not gone away. There have been recessions, Brexit and now the pandemic and yet HMRC is still pursuing taxpayers.
The costs are in two forms – financial and emotional.
The scheme promotors were paid a long time ago. Advisers need paying constantly simply to answer the latest round of questions.
Business relationships become strained. Fees become unpaid.
The problems have never been resolved. Life at home can be even more costly. Taxpayers become angry.
“I wish I had never done that.”
Life is put on hold
All the plans to retire early or to expand into new markets have ever been put on hold, scaled back or cancelled.
Employee Benefit Trusts, Remuneration Trusts etc. are attractive titles and suggest a measure of reward for all the hard work. But where’s the benefit now? If tax has to be paid on any remuneration then where’s the tax advantage in that?
What can be done?
If only there was a simple magical answer.
However, there is a strategy to be considered.
Take control. Determine what goals are achievable. Undertake a damage limitation exercise.
Is HMRC likely to give up and go away empty handed – no.
Deal with the past even if it means you having to give up on the tax saving that was being offered. There are Settlement opportunities being offered by HMRC. They may not be particularly palatable but at least the problem can be put in the past.
So what can be done?
If you have an unwanted EBT or Remuneration Trust, get in touch and seek specialist advice. Get the certainty that has been pursued for years.
There may still be some bumps in the road to a exit but at least everyone can move on in life.