Govt releases list of tax avoidance schemes for upfront payment

Thursday 24 July 2014

A list of tax avoidance schemes whose users could find themselves paying HM Revenue and Customs (HMRC) money owed upfront has been released.

The document has been published to in order to give those using illegal forms of tax planning and their advisors time to prepare for the accelerated payments, which are soon set to come into force.

The finance bill, in which the introduction of upfront payments is a key tenet, is scheduled for Royal Assent this month.

When passed, HMRC will have the power to demand accelerated payments, meaning contractors, limited companies, sole traders and other individuals who have used tax avoidance schemes will have to settle with the tax body before a case goes to trial.

Should a person be issued an accelerated payment notice, HMRC will write to them beforehand.

It is hoped the new measures will deter individuals from wrongly engaging in tax avoidance and help HMRC recoup money owed to it.

David Gauke, exchequer secretary to the Treasury, said: "Most people pay the tax that is due, when it is due, so it [is] unacceptable that a minority seek to hold on to the tax they should pay by using avoidance schemes.

"Accelerated payments will tackle the small minority of taxpayers who are currently able to put off paying tax, sometimes for several years. This will put them on the same footing as the majority of taxpayers who pay their tax up front."

Under existing law, taxpayers are obliged to tell HMRC that they are using an avoidance scheme. The tax body may then choose to challenge the scheme. Once the finance bill is passed, it is at this point that HMRC will seek accelerated payment.

This won't affect the ability of taxpayers to make their case to a tribunal or court. Individuals will still be able to challenge HMRC under the legal system and if they are victorious they will have their money returned to them with interest.

Users of tax avoidance schemes who want to see if they will be forced to make an upfront payment can find the list here. Schemes are searchable by reference number, which is the code given by HMRC when a promoter notifies it that the scheme exists under the rules for disclosing a tax avoidance scheme.

From August 2014 HMRC will phase the issuing of notices to current users. This will take place over a 20 month period, approximately.

By giving advanced notice, the tax body is hoping to help people who want to disassociate themselves from tax avoidance schemes. HMRC is encouraging individuals who want to settle levies with them to reach out immediately by dialling 03000 530 435.

However, the Treasury Select Committee has criticised accelerated payment, claiming it is not properly justified and goes against its previous recommendations.

Around 65,000 people are likely to be affected but HMRC has failed to explain what is "wholly exceptional" about the cases to justify the measures.

"In our Budget 2012 Report we recommended that the government restrict the use of retrospection to wholly exceptional circumstances. Witnesses told us that the government was not abiding by this recommendation," the Committee explained in a report.

By Victoria McDonnell

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