About the avoidance disclosure statistics

Contents

Introduction

On 1 August 2004 statutory provisions came into effect requiring arrangements that enable a person to obtain a tax advantage ('schemes') to be disclosed to HM Revenue & Customs (HMRC). The precise rules differ between taxes and result in disclosures that are fundamentally different in nature. In addition, the scope of the rules have widened since they were first introduced. This note provides context to the accompanying statistics by explaining the main differences that exist and the changes that have taken place.

Income Tax, Corporation Tax (CT), Capital Gains Tax (CGT) (the main regime) and National Insurance contributions (NICs)

The obligation to disclose rests principally with promoters of schemes. However, the obligation moves to the scheme user when they devise their own scheme; the person promoting the scheme is based outside the UK; or the promoter is unable to provide relevant information about the scheme to HMRC because they are bound by legal privilege.

The published statistics show the total number of schemes that have been reported.

It should be borne in mind that a disclosure from a promoter may be of a bespoke scheme for an individual client or a scheme that is offered to numerous clients. Also promoters are obliged to disclose schemes that are offered to clients but which are never adopted; and they are not required to detail to HMRC who their clients are, only the scheme mechanics. Consequently the statistics do not show:

  • the number of users of disclosable schemes
  • the number of generic schemes disclosed – more than one person may disclose the same type of scheme

Where scheme users, rather than promoters, are required to make the disclosure it is possible that HMRC would receive multiple disclosures of the same scheme. To ensure the comparability of the statistics, the scheme will only be counted as a single disclosure in these circumstances.

When introduced, the disclosure regime was limited in scope to schemes concerning employment or certain financial products (described as 'employment' and 'financial' in the statistics tables). This was widened with effect from 1 August 2006 to the whole of income tax, corporation tax and capital gains tax. But a series of 'hallmarks' limit the need to disclose all tax efficient schemes (described as 'Main Regime Hallmark' in the statistics tables) – the intention of the hallmarks being to limit disclosure to only those schemes that are new, innovative, or of specific concern.

With effect from 1 May 2007 arrangements that give an NIC advantage also became disclosable providing they are within a hallmark. The number of disclosures that include an NIC advantage are shown within these statistics.

Stamp Duty Land Tax (SDLT)

The disclosure regime was extended in 2005 to include tax arrangements relating to Stamp Duty Land Tax where the subject matter of the arrangements is commercial property with a market value of at least £5 million.

The main difference compared to the disclosure regime for Income Tax, Corporation Tax and Capital Gains Tax is that the hallmarks are not applied to limit what is required to be disclosed, however there is a 'white list' of arrangements that are not required to be disclosed.

Value Added Tax

The disclosure regime for VAT was introduced on 1 August 2004. However, disclosure is limited to two broad categories – listed schemes and hallmarked schemes:

Listed schemes (described as 'listed' in the statistics tables) are specific generic schemes that are designated in the relevant legislation. Taxable persons who are party to a listed scheme are required to notify HMRC unless their annual turnover (or, if part of a group, the turnover of the group to which they belong) is below £600,000.

Hallmarked schemes (described as 'hallmark' in the statistics tables) are schemes that include or are associated with a 'hallmark' of avoidance designated in the relevant legislation. Disclosure is not required if:

  • a third party, such as the scheme promoter, has voluntarily disclosed it to HMRC and provided the reference number allocated to it to the person who would otherwise be liable to make a disclosure
  • the turnover threshold applies – ie the person (or the group to which they belong) has an annual turnover below £10 million

The published statistics show the total number of distinct schemes that have been reported. Where more than one party notifies use of a distinct scheme, the notifications are treated as a single disclosure for statistical purposes.

Avoidance disclosure statistics for the period 1 August 2004 to 30 September 2009 (XLS 47K)

The next publication of the avoidance disclosure statistics will be on 30 April 2010.

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