'Spotlights' is all about tax avoidance.
It has a 'consumer protection' role in helping you to avoid unwittingly entering into arrangements that HM Revenue & Customs (HMRC) are likely to see as tax avoidance. It does this by identifying the types of arrangements or scheme which HMRC are likely to challenge. HMRC will do this both by providing you with some help to understand how they distinguish between artificial avoidance schemes and ordinary sensible tax planning and by describing specific schemes. Where HMRC think there may be particular drawbacks to a scheme that might not otherwise be obvious, including the fact that other taxpayers are no longer pursuing their arguments on an avoidance scheme, HMRC will tell you.
In Spotlights HMRC will:
Set out below are a number of indicators of tax planning to be wary of. 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 your Self Assessment. If you have doubts about a scheme then you should check with a reputable tax adviser.
The schemes featured in Spotlights are generally those which HMRC consider 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.
HMRC are aware that new tax avoidance schemes that seek to avoid Income Tax and National Insurance contributions (NICs) are being advertised to contractors, highly paid employees and those using recruitment agencies. It is claimed that these schemes get around new disguised remuneration rules.
Arrangements may involve payments passing through a series of companies, loans from a third party or an offshore alleged employer, a deed of covenant, secondments from one employer company to another or claims of self employment, etc. In HMRC’s opinion these arrangements do not succeed in avoiding the tax and NICs due. HMRC will challenge these arrangements and litigate where necessary to recover unpaid tax and NICs.
Current legislation ensures that rewards and recognition from working for UK-based businesses are charged appropriately to UK Income Tax and NICs. This legislation applies whether the rewards are routed through employee benefit trusts, employer funded retirement benefit schemes or through any other intermediaries, either as loans, transfers of assets or other payments. The legislation will also apply to such third party arrangements where an employment is disguised as self employment or a contractual arrangement.
Those intent on avoiding Income Tax and NICs by using trust arrangements should also be aware that there could be adverse Inheritance Tax (IHT) and trust tax consequences regardless of whether they themselves set up the trust. These include IHT charges when contributions are made to the trust, when funds are transferred from a trust to a sub-trust or removed from the sub-trust, when uncommercial loans are made by the trustees and at the ten year anniversary of the trust.
Spotlight 11: Avoiding Income Tax on pay (3 March 2011)
Spotlight 10: Stamp Duty Land Tax avoidance (7 June 2010)
Spotlight 9: Gift Aid with no real gift (29 March 2010)
Spotlight 8: Investments to obtain trade loss reliefs ('sideways loss relief') (8 February 2010)
Spotlight 7: Avoidance using Gift Aid (6 January 2010)
Spotlight 6: Employer-Financed Retirement Benefits Scheme (EFRBS)
Spotlight 4: Contrived employment liabilities and losses
Spotlight 3: Pensions schemes artificial surplus
Spotlight 2: VAT artificial leasing
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:
Tax agents can provide us with information about people or companies who may be promoting the type of arrangements covered by Spotlights by emailing Tax avoidance information.
Anyone offered a tax, duty, National Insurance or VAT product they are concerned about can also provide details of the tax arrangement to Tax avoidance information.
Please provide sufficient detail for us to understand the arrangements being offered. If you are willing to be contacted in the event that we need more information please let us know how and when it is best to contact you.
Spotlight II: VAT Supply splitting avoidance (9 February 2011)
