08 mars 2010
UK Avoid tax avoidance
It will help you to understand what we are likely to see as tax avoidance by identifying the types of arrangements or scheme which we are likely to challenge.
We will do this both by providing you with some help to understand how we distinguish between artificial avoidance schemes and ordinary sensible tax planning and by describing specific schemes.
Where we think there may be particular drawbacks to a scheme that might not otherwise be obvious, we will describe these.
In Spotlights we will
provide some advice on tax planning to be wary of, listing some indicators that we see as suggesting that a scheme may involve tax avoidance and which we are likely to investigate
- identify specific schemes which, in our view, are not likely to deliver the tax savings advertised. Where we see such schemes being used, subject to the particular facts, we will make a challenge and seek to ensure full payment of the right tax with the right due date
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 HM Revenue & Customs (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.
Tax planning to be wary of:
- It sounds too good to be true.
- Artificial or contrived arrangements are involved.
- It seems very complex given what you want to do.
- There are guaranteed returns with apparently no risk.
- There are secrecy or confidentiality agreements.
- Upfront fees are payable or the arrangement is on a no win/ no fee basis.
- The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided.
- The scheme is said to be approved by HMRC (it does not follow that this is true).
- Taxation of income is delayed or tax deductions accelerated.
- Tax benefits are disproportionate to the commercial activity.
- Off-shore companies or trusts are involved for no sound commercial reason.
- A tax haven or banking secrecy country is involved without any sound commercial reason.
- Tax exempt entities, such as pension funds, are involved inappropriately.
- It contains exit arrangements designed to sidestep tax consequences.
- It involves money going in a circle back to where it started.
- Low risk loans to be paid off by future earnings are involved.
- The scheme promoter lends the funding needed.