10 things HMRC won’t always tell you about how they tackle tax avoidance

Last year, HMRC published guidance entitled “10 things a promoter of tax avoidance schemes won’t always tell you.”


Clearly there are some promoters that do make outlandish claims (just as in any other sales-led industries) so perhaps deserve to be brought to account.


However, there are also some claims HMRC makes in their guidance that may not be all that they appear.

So we thought we would offer our opinion on each of their statements because we believe that honesty is a two-way street. We have even ranked them in order using our patented Truth-O-Meter!


 HMRC’s statementsOur view..1“You could face criminal conviction.

If you deliberately mislead or conceal information from HM Revenue and Customs (HMRC) you could be prosecuted and convicted”.


This feels like a big swing of the bat and the first example of the input of HMRC’s “Psychological Nudge Unit” who use phrases intended to scare/ guilt-trip the reader into doing the “decent thing”.

This statement continues to unhelpfully conflate tax evasion and tax avoidance.

To be clear, in the Criminal Finances Act 2017 Notes, aggressive avoidance is not criminalised.



2“You may have significant legal fees to pay.

If the scheme is taken to litigation, you’re likely to have hefty legal fees to pay. Your promoter may ask you to pay into a ‘fighting fund’ up front.”

This is more scaremongering. Very few tax avoidance scheme cases ever go to Tribunal (because HMRC don’t need to any more) and there are no published rulings we are aware of where a user has had “hefty legal fees to pay” afterwards.



3“HMRC is likely to beat your scheme in court.

HMRC wins around eight out of ten cases where taxpayers take avoidance schemes to court, and many more concede before that stage.”


Classic HMRC spin –this stat is based on 32 cases over a 12 month period in 2014, two of which were not about avoidance.

To take a case to Court, HMRC must feel there is at least a 50% chance of winning, so to put it another way, losing 1 in 5 cases is perhaps a source of embarrassment.



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

You won’t get a cash-flow advantage while HMRC investigates a scheme. You will be issued with an Accelerated Payment Notice, requiring you to pay the disputed tax up front.”


This isn’t strictly true unless this is a reference to APN’s. Even then, there are conditions that must be met before it could be is issued.

There is no universal application of APNs as HMRC implies here. HMRC’s thinking here is prevention better than cure – scaring users off using arrangements costs less than opening enquiries./ changing legislation..



5“Most schemes don’t work.

You may be told that avoidance is legal, but if the scheme doesn’t work you’ll have made an incorrect tax return which is not in accordance with the law. You are legally obliged to pay tax that is due and you may be charged penalties if you try to avoid it.”


Are HMRC implying an incorrect tax return would be breaking the law?

Another HMRC tactic is making bold statements like “schemes don’t work” but then add nothing further technical argument to stand these statements up.



6“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.”

We don’t imagine anyone outside of the Psychological Nudge Unit thinks this an effective behaviour lever.

HMRC recently published its latest list of “deliberate tax defaulters” -a somewhat depressing list of small restaurants, hotels and sole traders.

It didn’t contain any reality TV celebrities or public figures, which leads us to conclude that no one in the real world cares about that list’s existence.



7“The risk is normally all your own.

It’s 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. Some promoters set up simply to sell the scheme, and then disband.”

There is some truth to this. Risks (just as the benefits) do belong to the scheme user. As with any higher risk instrument, buyer balances risk and reward, but would rarely complain about risk if they do choose to enter into it.

The Government are introducing “Enabler” legislation in 2017 to target promoters of schemes, so that shares the risk around all parties.



8“Your scheme is never HMRC approved.

Getting an avoidance Scheme Reference Number from HMRC doesn’t mean the department has cleared the scheme.

HMRC issues these numbers when a scheme has signs of being designed to avoid tax. If a promoter is claiming that their scheme doesn’t need to be disclosed then HMRC are probably challenging that.”


At one time, more unscrupulous promoters (to be expected within any unregulated industry) implied an SRN meant HMRC’s agreement to it.

You might well ask that if HMRC knew these schemes existed, why did it take so long to do something about it?

Clearly most people do understand HMRC would never approve of anything that denies them collecting more tax – but perhaps HMRC think the general public are a harm to themselves?



9“It could cost you more than you bargained for.

Avoidance schemes are complex. They can give rise to unintended additional tax consequences, and the fees you pay the promoter do not count as tax paid.

So you could end up paying much more than just the tax you’re trying to avoid”.


This is true for tens of thousands of contractors who entered into schemes fully compliant with UK tax law at the time, then several years later found themselves with a substantial tax liability because of HMRC’s retrospective amendments to tax law.

This all helps HMRC meets its stated objective of “maximising revenue”.



10“You could be marked out as a high-risk taxpayer

Use of a scheme could mark you out as a high-risk taxpayer, which means that all of your tax affairs will be closely scrutinised in future, not just your claim for relief. “


Yet another threat to persecute taxpayers for the rest of their lives if they don’t tow the line.

HMRC simply do not have the time or resource to scrutinise everyone that would fall into this category so note the word “could”.






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