HMRC Spotlights unacceptable tax avoidance
HMRC have added a list of warning signs to the tax avoidance ‘Spotlights’ page of their website.
The introductory comments note that "The inclusion of one of these features does not necessarily mean that [unacceptable] 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 [unacceptable] tax avoidance and challenge your self assessment."
The full list of warning signs highlighted by HMRC is set out below:
- 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.