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Press watch: ‘Tsunami’ of lawsuits after crackdown creates £5bn tax bill

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According to the Financial Times (10 July 2014), lawyers are scrambling to file compensation claims against advisers who sold tax-saving schemes that have backfired to leave an estimated £5bn bill for individuals.

‘The whole landscape has suddenly changed. There will be a tsunami of litigation,’ said Kit Sorrell of Regulatory Legal Solicitors, which is acting for taxpayers claiming more than £100m from alleged mis-selling of tax avoidance schemes. Law firms had been waiting for legal appeals to be exhausted, but the UK tax authority, bolstered by new powers in the finance bill coming into law this month, has launched a pre-emptive strike, warning thousands of scheme participants to reach a deal before it sends out tax demands.

Jim Harra, director-general of business tax at HMRC said he had ‘no sympathy for these people’, adding: ‘Let’s not pretend that the people taking up such schemes are the hardworking honest majority.’

The schemes, popular in the mid-2000s, financed films, software games and even treasure hunts on shipwrecks. They made heavy initial tax-deductible losses and investors also borrowed heavily to offset future taxable profits against interest payments. They were sold to about 43,000 people by wealth managers and independent financial advisers.