Source: HMRC Press Release 14 October 2017
HM Revenue and Customs (HMRC) has won a landmark case against a tax avoidance scheme promoter that could lead to the recovery of £110 million.
The victory over scheme promoter, Root2, came after they failed to report a mass-marketed tax avoidance scheme, known as Alchemy, to the tax authority.
The First-tier Tribunal agreed with HMRC that the promoter did not abide by the DOTAS rules. There is no right of appeal against the Tribunal decision.
HMRC will seek to impose a substantial penalty on the promoter for failure to disclose the scheme.
HMRC does not approve tax avoidance schemes. Under DOTAS, promoters must notify HMRC of schemes that contain various hallmarks of tax avoidance. If a scheme has been notified under DOTAS, it does not in any way signify that it has been approved by HMRC.
DOTAS guidance can be found here.
Source: HMRC Press Release 30 September 2017
From 30 September 2017, the Criminal Finances Act 2017 introduces two new criminal offences – one applying to the evasion of UK taxes and one applying to the evasion of foreign taxes.
The offences hold corporations and partnerships criminally liable when they fail to prevent their employees, agents, or others who provide services on their behalf, from criminally facilitating tax evasion. This is a significant change from existing law under which they can only be found liable for criminally facilitating tax evasion if the most senior members of the organisation – typically the board of directors – are aware of the facilitation.
Source: accountancy age.com, 29 September 2017
“It’s possible that some of your clients won’t have the first clue about tax avoidance or its implications. Some of them may have a little knowledge but be working on the assumption that it’s all legal and above board. Educating them on the tax avoidance basics is a priority.”
“Crucial points to share
- HMRC is getting tough – any scheme that claims to help businesses reduce their tax liability is subject to investigation.
- It can be hard to recognise a tax avoidance scheme, but the government advises people to be wary of schemes that sound too good to be true, those that offer seemingly huge benefits with very little cost to you, and anything that offers payment in the form of a loan that you won’t be asked to pay back. Any scheme that requires moving money out of the country should definitely set those alarm bells ringing.
- Clients may come across promoters who claim that having a Scheme Reference Number (SRN) shows that they are HMRC approved. They aren’t, and a world of trouble is likely waiting for anyone who engages with such a scheme.
- Inform clients that responsibility lies with them. HMRC has made it clear that ignorance or misunderstanding are not going to be accepted as get-out-of-jail-free cards – whether you entered into a tax avoidance scheme by accident or with full knowledge, you’ll have to pay the price.”
Source: accountancy age.com 14 September 2017
“Diverted profits tax revenue collected by HMRC in 2016-17 totalled £281m, leaping from £31m collected in the previous year, according to data released by HMRC.”
“However, law firm Pinsent Masons said that many DPT disputes become transfer pricing disputes, and HMRC is spending an increasing amount of time settling the cases.”
““Transfer pricing disputes are taking HMRC nearly two-and-a-half years to settle – a year longer than its internal target. This is creating a serious backlog,” said Heather Self, partner at the firm.”
“Self said that she expected the number of DPT charging notices issued by HMRC to increase next year, as the tax applies to profits arising from 1 April 2015, and the deadline for notices for the period ending 31 December 2015 is 31 December 2017.”