Tax planning companies face £1 million fine

Friday 11 July 2014

In a bid to crack down further on tax avoidance, new proposals have been released that could allow HM Revenue and Customs (HMRC) to fine tax advisers up to £1 million if they do not comply with a series of regulations.

According to the new plans, if tax planning companies that are being monitored by HMRC do not make this clear on their website, they will be subject to sanctions.

Fines will also apply if all present and prospective clients aren't told through marketing material and other communications that a planning agency is being monitored by HMRC.

Additionally, promoters of tax planning schemes must issue clients with a 'promoter reference number', which must be used by the individual on their tax returns and other material sent to HMRC. It will also be an offence for tax advisers to dispose of relevant documents.

Pinsent Masons claims tax planning companies will not be fined for their first offence.

Ray McCann, partner of Pinsent Masons, said: “HMRC would like to drive the providers of tax avoidance schemes out of business and they have already had success in this area with some of the more prominent promoters of tax schemes already having shut up shop. £1 million fines are a sudden and unprecedented escalation of the sanctions that HMRC have against promoters of tax planning schemes and again makes clear the determination of the government to prevent abusive tax schemes."

This is the latest in a wave of changes that are designed to reduce instances of tax avoidance across the UK and contractors, limited companies and sole traders now have compliance clearly in their sights.

Figures suggest it's paying off too, with HMRC collecting record sums of additional tax revenue over the year to May 2014.

Over a 12 month period, tax profits for HMRC totalled £23.9 billion. This was secured through a combination of investigations and tax paid on time, growing by £3.2 billion year-on-year. When compared to the tax taken three years ago, revenues are up by £9 billion.

The amount raised by HMRC following the introduction and application of new measures is well over the initial yearly target of £1 billion, which was set down in the 2013 Autumn Statement.

For the self-employed, the writing is clearly on the wall that caution is needed when it comes to tax planning and completing tax returns.

Speaking in May, Matt Fryer, business development manager at Brookson, explained: "We know that HMRC is not only heavily clamping down on tax avoidance schemes, but small mistakes that may have been overlooked in years gone by could now lead to hefty fines and penalties, so people really need to be on their game with their tax.

"Contractor accountants are now more important than ever to ensure that freelancers remain compliant in their tax affairs. There's a lot of added  responsibility, especially for those new to contracting and it's crucial to have the right support in place to ensure all risks are appropriately managed."


By Victoria McDonnell

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