In a consultation paper published yesterday, the Revenue proposed listing tax avoidance schemes that were unlikely to deliver the tax savings claimed. At present, taxpayers who use such schemes benefit from deferring the disputed tax payment until HMRC has completed an investigation.
Under the proposals, users would be required to disclose to HMRC that they are in a "blacklisted" scheme and would be subject to a charge on underpaid tax. As an incentive to protect themselves from the charge however, users can opt to pay the oustanding tax upfront.
The Revenue defines a high risk tax avoidance scheme as a scheme that uses contrived arrangements to seek tax advantages in circumstances where they are not intended to be available and which HMRC believes does not deliver the advertised tax advantages.
Schemes promoting avoidance of income tax, capital gains tax, corporation tax, stamp duty land tax, inheritance tax and VAT could all potentially feature on the Revenue’s list.
Increased penalties
In addition to publishing the list HMRC also said it is considering whether or not to increase penalties.
Under the Disclosure of Tax Avoidance Schemes (DOTAS), the penalty is a fixed amount of £100 per scheme for the first occasion, rising to £500 per scheme for a second occasion within three years and £1,000 on the third or subsequent occasions.
The government is proposing to set penalties at a higher level than for DOTAS to further deter individuals from avoiding paying up. If put in place, HMRC would impose the penalty which would be subject to "reasonable excuse" provisions and there would be a right of appeal.
David Gauke, exchequer secretary to the treasury, indicated that the time had come to crack down on unruly schemes.
“These are highly aggressive and artificial tax avoidance schemes which we want to stop," he said. "For too long, wealthy taxpayers were using these schemes as a cheap loan from the government. Our proposals would stop this practice, reducing the cost of HMRC’s interventions and ensuring a fairer tax system."
He called on tax advisers and professional bodies to share their views on the consultation, which is open to responses until 31 August. To take part please visit HMRC’s website
