Market leading insight for tax experts
View online issue

Avoidance schemes on the rise

printer Mail

HMRC has published a report Use of marketed tax avoidance schemes in the UK setting out the numbers and characteristics of taxpayers using marketed tax avoidance schemes in 2018/19.

The number of people using avoidance schemes has increased from 22,000 to 30,000 in the five years to 2018/19, according to the report, with the market shifting towards employment-based schemes aimed at middle-income earners including contractors and agency workers. HMRC figures show that disguised remuneration avoidance schemes now make up 98% of the market.

The report notes that promoters can be ‘hugely opportunistic’; for example, targeting NHS workers returning to the frontline during the covid-19 pandemic, and revisiting failed loan charge schemes with offers of further schemes which incorrectly claim to get around the charge.

Steven Porter, partner at Pinsent Masons, said: ‘Some middle earners seemingly get trapped in avoidance schemes as they aren’t able to pay back the tax they avoided and come clean with HMRC. If they do get caught, the strain of trying to find that unpaid tax, interest payments and penalties can be ruinous. Those using avoidance schemes would always be best advised to seek professional assistance and consider coming forward to HMRC.’

According to HMRC, London boroughs dominate the usage of tax avoidance schemes; Barking and Dagenham top the league table with 229 people per 100,000 using avoidance schemes.

As HMRC’s data shows (see below), avoidance represents around £1.7bn of the total estimated tax gap of £31bn, with around £0.6bn attributed to avoidance schemes marketed to individuals.

Separately, HMRC has launched a new campaign Tax avoidance – don’t get caught out to highlight the signs of tax avoidance and encourage individuals to report avoidance arrangements via HMRC’s fraud hotline.

HMRC has also joined forces with the Advertising Standards Authority to issue enforcement notice: advertising tax arrangement schemes targeting websites which advertise tax arrangements to UK individuals or businesses that have been challenged by HMRC and also those with equivalent schemes which are ‘liable to HMRC intervention’. As RSM points out in its Weekly Tax Brief: ‘From now on ... websites should clearly state the risks associated with tax arrangements and ensure that no claims of endorsement are made which cannot be supported by documentary evidence. From 31 January 2021 targeted monitoring and enforcement will take place. Failure to comply carries the risk of ASA sanctions, and HMRC or trading standards intervention.’

 Amount of tax revenue lost
Failure to take reasonable care £5.5 billion
Legal interpretation £4.9 billion
Evasion £4.6 billion
Criminal attacks £4.5 billion
Non-payment £4.1 billion
Error £3.1 billion
Hidden economy £2.6 billion
Avoidance £1.7 billion



Issue: 1512
Categories: News