HMRC puts spotlight on tax avoidance

HM Revenue and Customs has put the 'spotlight' on what it is likely to see as tax avoidance by identifying the types of arrangements or schemes which it is likely to challenge.

In its 'Spotlights' publication it provides advice on tax planning to be wary of, listing some indicators that it sees as suggesting that a scheme might involve what it classes as tax avoidance and which HMRC is likely to investigate.

It also identifies specific schemes which, in its view, are not likely to deliver the tax savings advertised and says that where it sees such schemes being used it could challenge and seek to ensure full payment of the 'right tax with the right due date'.

HMRC sets out a number of indicators of tax planning to be wary of. HMRC says that the inclusion of one of these features does not necessarily mean that tax avoidance is involved, but the more of these features that are present, the more likely it is that HMRC would see the arrangements as tax avoidance and challenge a self assessment.

HMRC's list of tax planning to be wary of includes:

• It sounds too good to be true.
  
• Artificial or contrived arrangements are involved.
  
• It seems very complex given what you want to do.
  
• There are guaranteed returns with apparently no risk.
  
• There are secrecy or confidentiality agreements.
  
• Upfront fees are payable or the arrangement is on a no win/ no fee basis.
  
• The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided.
  
• The scheme is said to be approved by HMRC (it does not follow that this is true).
  
• Taxation of income is delayed or tax deductions accelerated.
  
• Tax benefits are disproportionate to the commercial activity.
  
• Off-shore companies or trusts are involved for no sound commercial reason.
  
• A tax haven or banking secrecy country is involved without any sound commercial reason.
  
• Tax exempt entities, such as pension funds, are involved inappropriately.
  
• It contains exit arrangements designed to sidestep tax consequences.
  
• It involves money going in a circle back to where it started.
  
• Low risk loans to be paid off by future earnings are involved.
  
• The scheme promoter lends the funding needed.