HMRC issues letters warning of avoidance fines

Friday 14 November 2014

HM Revenue and Customs (HMRC) has written to a number of tax avoidance experts warning of a potential public denouncement and the revealing of a number of their clients’ names.

HMRC has labelled these types of advisers as “high risk promoters” of aggressive tax avoidance schemes, while the letters have signalled that many could soon be “named and shamed”.

Speaking to ContractorUK, an adviser to contractors has said the issuing of letters will act as a deterrent to scheme providers, as well as scheme users and contractors.

While HMRC has noted that the move will tackle just a “small minority” of tax advisers, it does show that contractors must be careful about their handling of tax issues.

Freelance workers and limited company contractors are likely to outsource their accounting and tax details to advisers and accountants, to avoid the stress of dealing with income figures to determine what they owe to the government. However, promoters of avoidance schemes should be avoided at all costs, with HMRC cracking down on those that push them.

As noted in the latest batch of warnings, HMRC has issued fines to promoters up to £1 million. Parliament has allowed the taxman to seek out these avoidance experts and soon a number of them could be revealed publicly.

Of course, contractors should welcome this news, as it helps them to avoid becoming inadvertently involved in an avoidance scheme they have no knowledge or understanding of.

Contractors must be especially vigilant against this type of activity, as HMRC has revealed that fines for those connected to the tax advantage schemes will also be issued.

Treasury minister David Gauke has expressed confidence about the likelihood of catching tax avoiders, referencing previous success when tracking such scheme-users down.

“The government has taken unprecedented steps to clampdown on the selfish minority who practise tax avoidance”, he said at a HMRC stakeholder conference.

“I would strongly advise anyone thinking of signing up to a scheme which they have been told will legally reduce their tax bill to carefully consider today's list of things a promoter may not tell you.”

The list Mr Gauke refers to is the “Ten Things You Need to Know About Tax Avoidance” post on the government’s website, which outlines the risks people take when becoming involved in such schemes.

Among the points on the list, the government stresses that most schemes simply do not work. If you don’t pay the tax you owe, you may be liable to further fines and increased payments in the future.

In addition to increased costs due to fines, the government also pointed towards excessive legal fees becoming an issue for those involved, willingly or not, in any avoidance activity.

According to Mr Gauke, the list has been issued to protect taxpayers and also make people more aware of the dangers.

Hopefully, following the publishing of the list, contractors will be more likely to spot the warning signs that may be present when speaking to an adviser trying to promote tax avoidance.

Among all the things you have to deal with as a self-employed worker, becoming embroiled in a tax investigation would certainly not be welcome.


By Victoria McDonnell

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