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.
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 individual schemes
that have been reported.
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.
For SDLT the statistics show arrangements disclosed since the disclosure regime was extended in 2005 to include tax arrangements where the subject matter is non-residential property with a market value of at least £5 million.
From 1 April 2010 the regime was further extended to include SDLT arrangements where the subject matter of the arrangements is residential property. . Disclosure is now required for schemes where:
For IHT, the statistics show the number of disclosures received since the disclosure regime was extended in April 2011 to include arrangements seeking to avoid or reduce the IHT entry charge when transferring property into trust. Disclosure is only required for schemes that are new or innovative. Schemes which are the same, or substantially the same, as arrangements made available before 6 April 2011 are exempted from disclosure.
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:
The published statistics show the total number of 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.
The next publication of the avoidance disclosure statistics will be on 1 May 2013.
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