'Spotlights' warns you about certain tax avoidance schemes which HM Revenue & Customs (HMRC) thinks you should be aware of. These are just some of the schemes which HMRC believes are being widely offered to help those using them to avoid tax. HMRC is currently improving Spotlights to add more schemes.
You should be wary of other types of schemes, not just those listed here. If you are offered a way to pay less tax that sounds too good to be true, it probably is and be aware, HMRC never approves any scheme.
You are responsible for making sure that your tax return is correct - so make sure you understand what you are signing up to. If you do use an avoidance scheme you will be subjected to an HMRC enquiry.
If you want to report a scheme that you believe has been set up to avoid tax, you should let HMRC know.
HMRC has won another case in the tribunals involving an attempt to avoid tax and National Insurance contributions on employee bonuses. In LM Ferro Ltd v HMRC a bonus was paid in the form of an award of shares. The decision confirmed HMRC's view that these types of devices to avoid tax simply do not work - if you pay what is really a bonus, tax and National Insurance contributions are due no matter how it is dressed it up.
The scheme in LM Ferro was marketed by Powrie Appleby but similar avoidance schemes were marketed by other promoters. HMRC considers cash received by beneficiaries of awards in those schemes is also chargeable to Income Tax and National Insurance contributions.
HMRC expects those who used these schemes to make full payment of the tax and National Insurance contributions due, plus interest. Those companies and employees affected should contact HMRC to settle their liabilities and prevent additional interest accruing. You can contact HMRC on Telephone 03000 532624.
Penalties may be charged if you failed to take reasonable care when making returns to HMRC.
Read decisions in other recent cases where attempts to avoid tax on bonuses failed from the links below.
You can find previous Spotlights from the links below:
The schemes featured in Spotlights are generally those which HMRC considers have the widest implications and about which there is the greatest need to warn potential users. They will often be schemes that have been disclosed to HMRC and have been given a Scheme Reference Number (SRN).
Please note that the issue of a SRN does not mean either that HMRC 'approves' the scheme or that HMRC accept that the scheme achieves its intended tax advantage.
These articles are limited exceptions to the usual rule that HMRC do not comment on tax avoidance. No further comment will be made. Only a minority of schemes will appear in Spotlights. In particular, HMRC will not include schemes aimed at very specialised areas, with a limited scope or where HMRC estimate not much tax loss is involved. A scheme that has not featured in Spotlights may still be challenged. You may wish to consider it in the light of the advice above on 'tax planning to be wary of' and consult a reputable tax adviser.
Where HMRC come across tax avoidance schemes they actively challenge them, through the courts where appropriate.
There are occasions when taxpayers concede that the avoidance doesn't work rather than taking their case to litigation. This section highlights areas of avoidance where taxpayers have conceded that the tax they have sought to avoid is due.
Taxpayers have been conceding the disputed tax in the following avoidance arrangements: