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HMRC offer to settle tax avoidance schemes

We report on the recent Government initiative to clamp down on tax avoidance and evasion by inviting participants in certain schemes to settle their tax liabilities by agreement, without the need for litigation. 

HMRC offer to settle tax avoidance schemes

Towards the end of last year HMRC launched a fresh push to crack down on tax avoidance and you may have seen some of the resulting publicity. As part of this process, HMRC has been offering participants in certain schemes the opportunity to settle their tax liabilities without litigation and should by now have contacted all those who are eligible. This opportunity is not open-ended and HMRC has threatened to accelerate its investigations into those who do not settle now.

HMRC is offering settlement to participants in the following four schemes:

  • UK GAAP partnerships/corporates that attempt to create a loss through the write-off of expenditure or the value of rights or assets through Generally Accepted Accounting Practice;
  • Partnerships that attempt to claim reliefs and allowances, for example in partnerships that invested in carbon trading;
  • Film production partnerships that attempt to claim relief for expenditure incurred on the production of a qualifying British film under S.42 and 48 Finance Act (no.2) 1992; and
  • Sole traders that attempt to create a loss through a self-employed trade that would involve substantial expenditure said to be incurred in the trade, or a write-off of expenditure or the value of rights or assets through Generally Accepted Accounting Practice.

HMRC is not offering settlement to participants in the following:

  • Film partnership sale and lease back schemes;
  • Interest relief schemes that result in a claim to interest relief under S353(1) ICTA 88 that is used as a deduction against general income;
  • Partnerships into which HMRC has commenced criminal investigations;
  • Any cases that are identified by HMRC during the course of an enquiry as falling within its criminal investigation policy or civil investigation of fraud procedure; and
  • Cases that HMRC considers are inappropriate for this settlement opportunity, for example where HMRC considers that it has strong grounds to deny all of the tax relief claimed.

It is anticipated that these settlement opportunities will be of great interest to accountants and insurers of accountants whose clients are under investigation by HMRC for their involvement in one or more of the four eligible schemes above. This is especially so where the client has brought a related professional negligence claim against the accountant, or where circumstances exist such that a claim against the accountant is anticipated for such losses as the client may suffer in the course of HMRC’s enquiry into their affairs.

By Jonathan Hyde

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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