Tax avoidance and evasion
Wednesday, 12 September 2018
Over recent months, we’ve seen a variety of media reports of tax avoidance and evasion; from global international businesses not appearing to pay their fair share of tax, to celebrities who become involved in “schemes” that promise that no tax will be payable in exchange for a management fee.
HMRC were granted additional funding of £155 million in 2017 to address tax avoidance and evasion. They have set up specific teams to deal with counter-avoidance and insolvency; engaging with Insolvency Practitioners via HMRC roadshows and articles in professional press.
The fight against those looking to evade tax or using schemes has significantly increased and with that, the public and the media provide no sympathy for the supposed “innocent” parties.
One of the most common of these schemes is an Employment Benefit Trust (“EBT”).
An EBT will commonly involve a loan to the employee/director which is eventually written off. The promoters of these schemes claim that no tax is due and the cost is often a percentage (12.5%) of the amount “invested”. Since 2010, these loan payments have been taxable as Disguised Remuneration and from April 2019, any loans not settled, and from the period April 1999-December 2010, will become taxable. Any loan from December 2010 should have been taxed as income when the loan was made.
Broadly speaking, if you haven’t settled your affairs by April 2019 then the “loan charge” will become due.
So, what if you, or a client, are involved in a tax scheme?
Put simply: settlement! Here’s a recent quote from an HMRC article: “Counter Avoidance’s Insolvency specialists aim to increase tax yield from insolvent users of avoidance products and to make sure insolvency is not seen as a way to escape avoidance debts.”
If settlement isn’t achieved, HMRC will be looking at the full range of collection options including liquidation of companies and personal bankruptcy.
HMRC provide opportunities to settle. Penalties and interest may well apply but the sooner you withdraw from schemes and discuss settlement, the lighter the penalties are likely to be.
HMRC will advise that commercial settlement is not an option, however, where full disclosures are made and there are limited assets/resources to repay, then HMRC will look at each case on its own merits.
To speak to a member of our specialist team, call 0330 024 0888 or email email@example.com
Andrew is a liquidator of companies with EBTs where settlements have been successfully made between directors and HMRC; a company that promoted schemes to 300 “workers”; and where £3.5 million has been recovered from Switzerland. He is also trustee in a bankruptcy for an individual who not only personally used “schemes” but also promoted them.