10 things a tax avoidance scheme promoter will not always tell you

10 things a tax avoidance scheme promoter will not always tell you

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HMRC is taking tough action to crack down on tax avoidance promoters and in the past few years the government has successfully clamped down a number of tax avoidance schemes.

Recently HMRC published a guideline listing ten things that promoters of tax avoidance schemes won't always reveal.

Promoters are very good at convincing people that the tax avoidance scheme is a good one and legal, but in reality these schemes are flawed and you will be making an incorrect tax return which violates tax laws. The result of this is you will be under legal obligation to pay the HMRC of any tax that is due and you could be penalised if you try to avoid paying the right taxes.

  1. Most schemes don't work

    Promoters are very good at convincing people that the tax avoidance scheme is a good one and legal, but in reality these schemes are flawed and you will be making an incorrect tax return which violates tax laws. The result of this is you will be under legal obligation to pay the HMRC of any tax that is due and you could be penalised if you try to avoid paying the right taxes.

  2. End up paying more than you bargained for

    When a scheme is being promoted you might think you are saving a huge deal but these schemes are complex. Needless to add, the fees you pay the promoter do not count as tax paid and as a result you will end up paying more money than just the tax you try to avoid.

  3. You may have substantial legal fees to pay

    If proved that you are a deliberate tax avoider the scheme will be taken to litigation, and you are likely to have hefty legal fees to pay.

  4. You could face criminal conviction

    There has been a surge in HMRC prosecutions and if your scheme is not HMRC approved and you consciously mislead or conceal information, you could be prosecuted and convicted.

  5. You could face publicity as a tax avoider

    If you are named in court papers when the case is litigated, or in public registers, you could be reported in the media as a tax dodger and face negative publicity as a tax avoider.

  6. Your scheme is never HMRC approved

    Your promoter might tell you they have a tax avoidance Scheme Reference Number from HMRC, but this does not mean the department has cleared the scheme and it is ‘approved’. A Scheme Reference Number is issued by HMRC when they see signs of a scheme designed to avoid tax.

  7. You could be marked as a high-risk tax payer

    If you are caught once by HMRC for using an avoidance scheme you could be marked out as a high-risk taxpayer, which means all your future tax affairs will be closely scrutinised and you will end up on the taxman’s radar.

  8. HMRC is likely to beat your scheme in court

    If you have looked into statistics you may already know this, HMRC wins 80% of cases where taxpayers take avoidance schemes to court. So the question remains, is it really worth the risk?

  9. The risk is normally all your own

    It is unlikely that a promoter will give you a guarantee that a scheme will work and they probably won’t be around to support you once HMRC starts investigating your tax affairs. There are also incidents where some promoters set up simply to see their scheme and then disappear into the night.

  10. You’ll have to pay the tax up front anyway

    You will not get a cash-flow advantage while HMRC investigates a scheme. You will be issued with an Accelerated Payment Notice, a recent change in legislation, which means you will have to pay the disputed tax up front while the HMRC looks into it further.

We strongly advise anyone thinking of signing up to a scheme which you have been lured to believe will reduce your tax bill, to carefully consider the above list of things a promoter of a scheme may not tell you.  If caught you will have to pay the tax dodged, interest and penalties.

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