Market leading insight for tax experts
View online issue

You are now a higher risk customer, HMRC tells tax avoidance scheme users

printer Mail

HMRC is to write to 1,500 users of a tax avoidance scheme warning them that the department’s specialist investigations unit will investigate their tax affairs, the BBC News website reported.

An extract of one HMRC letter said: ‘Paying your taxes in full is the right thing to do. Not paying tax reduces our public finances. We all lose out on essential public services such as roads, the NHS and schools.’

The National Audit Office revealed last week that HMRC has 41,000 open tax avoidance cases relating to marketed schemes used by individuals and small businesses, and that HMRC had estimated that at 31 March 2012 the ‘avoidance risk’ from such taxpayers was £10.2 bn.

Amyas Morse, head of the NAO, said HMRC’s disclosure regime had had ‘little impact’ on the persistent use of highly contrived schemes.

‘The correspondence, the first of its kind, is a pre-emptive strike before the scheme's legality is challenged,’ the BBC report said. HMRC would normally contact a scheme’s promoters to challenge a scheme: ‘In the new tactic, it is writing to people directly to give them the opportunity to get out of the scheme, which has not been named publicly.’

Chas Roy-Chowdhury, head of taxation at ACCA, was quoted as saying he hoped that HMRC’s action would help to ‘bring down the numbers’ of such schemes and ‘restore some faith in the tax system’.


Tax practitioners and commentators interviewed by the NAO reported that the market had changed and, to some extent, polarised. ‘Our interviewees considered that an increasing proportion of marketed schemes were now sold by small specialist firms, often known as “tax boutiques”. Our analysis of the DOTAS disclosures made by promoters since 2004 supports this view,’ the NAO said.

Leaders of the major tax and accountancy professional bodies have backed the government’s efforts to tackle aggressive avoidance, but their stance has provoked some debate among practising tax advisers.

Responding to the NAO report, Cormac Marum, head of tax advisory at chartered accountants Harwood Hutton, said: ‘The NAO have got themselves in a muddle over this. Their report recognises that tax avoidance is not illegal but for some reason they want to stop it. The problem here is not that taxpayers want to apply the tax law, albeit to their advantage, but with the law itself.’

HMRC resources

The NAO report failed to address ‘the key issue’ of resources, said the Association of Revenue and Customs (ARC) which represents senior HMRC staff.

ARC president Gareth Hills said: ‘The one sure way to tackle the mountain of open avoidance cases and the lengthy litigation queue would be by investing in HMRC’s tax professionals, lawyers and accountants. As ARC made clear in its recent evidence to the Commons Treasury sub-committee, the government needs to invest in HMRC to ensure avoidance and evasion are effectively countered, both now and in the future.’

Earlier this month ARC welcomed David Gauke’s comments on pay levels for senior HMRC staff. The Times reported that the exchequer secretary said that ‘top tax inspectors should be paid more than the prime minister if Britain is to combat tax avoidance’.

‘If you have to pay the going rate to get the right people, there’s a very good case for doing that,’ Gauke told the all-party parliamentary group on business, finance and accountancy. ‘If you have to pay more than the prime minister’s salary then that’s what we have to do.’

Hills said: ‘ARC has consistently argued that there needs to be proper and fair review of how we reward our senior staff. These are the senior professionals who typically bring in 30 times their cost. These are the people who ultimately ensure that the country can afford to build schools and hospitals. To pay well below the market rate and expect to be able to recruit and retain the very best talent is not realistic.’