HM Revenue & Customs Anti-Avoidance Strategy
The Strategy
making tax law robust against avoidance, engaging with our customers about our approach to avoidance, optimising our operational response to avoidance; and changing the economics of avoidance to make it less attractive
Why tax avoidance is a problem for everyone
The Government, Her Majesty's Revenue & Customs (HMRC) and HM Treasury (HMT) have a shared objective of minimising the tax gap (that is, the difference between the tax collected and the tax we think ought to be collected) within the context of the Government wider agendas. We want to provide our customers with a level playing field while maintaining the UK's international competitiveness. Our strategy for delivering this objective is through encouraging everyone to pay tax at the right time and vigorously tackling those who deliberately avoid their responsibilities.
In the UK the tax loss from avoidance is estimated to run into several billion pounds across both direct and indirect taxes. This directly affects the delivery of public services and long-term economic growth. Avoidance distorts markets, is economically unproductive and breaks the link between economic productivity and reward.
The vast majority of our customers do not participate in tax avoidance and will stand to benefit from HMRC's anti-avoidance strategy. HMRC is taking a proportionate, risk - based approach to avoidance, which is consistent with HMRC's commitment to supporting our customers.
What is tax avoidance?
HMRC's Anti-Avoidance Group (AAG) offers guidance about what factors indicate that tax avoidance may be occurring. It is impossible to provide a comprehensive definition of avoidance - HMRC's guidance describes the sorts of activity that HMRC may perceive as avoidance.
Based on an understanding of HMRC's guidance, our customers ought to be aware when they are undertaking activities that HMRC may regard as tax avoidance and thus taking on higher risks.
The ways to achieve the strategy will include the following.
- We will quickly and expertly prevent and close down avoidance by effective legislation
- We will engage with our customers about how we address avoidance
- We will know what avoidance schemes or bespoke arrangements are being marketed and used
- We will know which organisations and individuals are more likely to carry out avoidance and organise our resources accordingly
- We will treat those who avoid their tax obligations as higher risk than organisations and individuals who do not
- We will be proactive at challenging avoidance by investigation and effective litigation
- We will take a strategic approach in litigating avoidance cases
- We will comment on selected activities which we think are ineffective
We will measure progress by:
- Observing any identifiable changes in the avoidance tax gap.
- Collecting and examining qualitative and anecdotal evidence.
- Identifying process efficiencies (such as improvements in the robustness of budget measures) and cost savings.
- Baseline measurement of perception of risk and monitoring of changes.
AAG will lead the implementation of this strategy, but its success will depend on active engagement with our customers and collaborative working:
- across HMRC;
- with HMT;
- internationally through the Joint International Tax Shelter Information Centre, OECD and the European Union
This strategy was produced by HMRC's Anti-Avoidance Group in consultation with the wider Department and HM Treasury. It will be kept under review and is subject to change to reflect changing circumstances.
We will quickly and expertly prevent and close down avoidance by effective legislation.
By working collaboratively across HMRC and with HMT, skilled tax technical resource will minimise avoidance opportunities in new legislation. New measures will be designed to be robust against avoidance and, where necessary, further testing by avoidance experts will be conducted. Technical resource will also be directed at assessing vulnerabilities within existing legislation, to predict and prevent the evolution of tax avoidance. We will review the need for and, if necessary, we will seek more effective powers for dealing with avoidance. It is for Ministers ultimately to decide on policy changes.
We will engage with our customers about how we address avoidance.
We will share with our customers our internal guidance about what kind of indicators would lead us to examine a case from an avoidance perspective. Our general policy to consult whenever possible on new measures will extend to anti-avoidance measures.
See also Guidance on Avoidance Indicators and Spotlights
We will know what avoidance schemes and bespoke arrangements are being marketed and used.
The disclosure rules will provide increased transparency and intelligence, enabling us to discover avoidance more quickly. HMRC will continue to gather intelligence through consultation both formally and informally across the department and with HMT, taxpayers and tax practitioners. New databases will ensure that all intelligence on avoidance activity is captured centrally and shared appropriately.
We will know which organisations and individuals are more likely to carry out avoidance and organise our resources accordingly.
Increased intelligence capabilities, supported by greater transparency will mean that HMRC will be more likely to spot avoidance than now. Using new databases and tools for data matching HMRC will be able to draw on and share an extensive source of high quality information to ensure high-risk taxpayers are identified.
We will treat those who avoid their tax obligations as higher risk than organisations and individuals who do not.
We will encourage and help taxpayers to meet their obligations. Where HMRC identifies a risk that avoidance is present, we will apply our investigation, litigation and policy resources to match that risk.
We will be proactive at challenging avoidance by investigation and effective litigation.
HMRC will develop a climate in which avoiders face increased risks of investigation and litigation. AAG will lead on HMRC's avoidance scheme resolution policy, setting out a consistent approach to help achieve a long-term change in taxpayer behaviour. This approach will include seeking penalties in appropriate circumstances. Avoidance arrangements which may involve dishonesty or criminality will be identified and reviewed for potential criminal investigation.
We will take a strategic approach in litigating avoidance cases.
By using project management techniques we will identify taxpayers who have undertaken similar or connected avoidance arrangements. Protective measures will be put in place to prevent loss of tax pending the outcome of lead cases. Following the successful outcome of litigation, HMRC will ensure that the collection of tax outstanding is maximised. This way of working will promote a consistent approach for each scheme and across all schemes.
