Tax Avoidance Schemes And Penalties, Tax Avoidance Schemes And Penalties, HBG Advisory

Tax Avoidance Schemes And Penalties

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Tax Avoidance Schemes And Penalties

UK Tax Avoidance Schemes And Penalties. If you have been referred to an offshore intermediary (tax avoidance scheme). The HMRC may hold your accountants and any other party accountable for their actions, if the schemes are therefore not valid. Penalties, however, are severe. See (The “Criminal Finances Act, 2017”).

The Rules

Operating any form of tax avoidance in the UK should be disclosed under the disclosure rules. Individuals must inform  HM Revenue and Customs (HMRC) about such schemes, allowing them too:

  • Be alerted earlier to schemes;
  • Judge who operates such schemes.

Failing to advise the HMRC risks you receiving a penalty.

Three disclosure regimes exist:

  • VAT disclosure regime (VADR);
  • Disclosure of Tax Avoidance Schemes: VAT and other indirect taxes (DASVOIT);
  • Direct taxes (including Apprenticeship Levy) and National Insurance contributions (DOTAS).

If you have concerns, please arrange a free meeting with HBG Advisory.

UK Tax Avoidance Schemes and how to identify them.

  • Promising 90 per cent, take-home pay;
  • Rivalling their scheme as better than “PAYE.”


If a scheme says, it is “LEGAL“! How is it?

However, tax evasion is “ILLEGAL“.

Can HMRC backdate:

Yes! If avoidance schemes are therefore used. A tax avoidance scheme can however be deemed ILLEGAL. Even then, if LEGAL, the HMRC may still challenge the scheme.

Compliant with IR35:

IR35 affects limited company contractors who work in the private sector. Contractors are therefore either inside or outside IR35 company closure. Whether in or out, you still must pay tax and National Insurance Contributions (NIC).

Tax Avoidance Schemes And Penalties – Experts:

Tread carefully, however, when engaging so-called “EXPERTS“. Are they members of an accredited body? If not, stay clear. If so, dig further. How credible are they? Are any of their clients under HMRC compliance checks? Is what then they promise too good to be true? Therefore, avoid a promoter of tax avoidance. Tax fraud will, however, prompt a criminal investigation.

What is the difference between Tax Avoidance and Tax Evasion?

Avoidance is legal. It makes the best use of the then tax regime available in the UK.  Avoidance therefore ensures the best use of reducing tax payable legally. Tax sheltering is similar. Havens, therefore, are jurisdictions used to reduce taxes, not hidden.

Evasion is illegal. Corporations used evasion, individuals, trusts and other entities so that they can evade taxes. Tax evasion and some tax avoidance are really therefore then a type of tax non-compliance. The HMRC views them as a group of activities unfavourable to the UK Tax system.

UK Tax Avoidance Schemes And Penalties – Is Tax Avoidance Illegal in the UK?

Tax avoidance works within tax laws that governments have conceded legal; they do not consider tax avoidance moral. Large corporations and businesses that adopt tax avoidance are currently under scrutiny, as they pay insufficient if they operate in the country.

However, companies employ tax experts offering Tax Planning, as HMRC wants matters to operate, as many billions of potential tax are not paid to HMRC.

What are some examples of Tax Avoidance?

Examples of legal tax avoidance are investing in an Individual Savings Account (ISA). You legally, therefore, avoid income tax on interest earned. Another option is to therefore then invest your money in a pension scheme.

How do you, therefore, do Tax Avoidance?

Tax avoidance schemes are legal, and examples are quoted. You can claim deductions and credits as allowable on expenses and your tax return to carry out legal tax avoidance. You may also make the best use of investments that offer therefore tax advantages.

Tax Avoidance Schemes And Penalties – HMRC Spotlight Schemes.

These spotlights are to warn you away from tax avoidance schemes.

Spotlights 11 to 19.

Stamp Duty Land Tax avoidance; update (Spotlight 19);
Stripped bond tax avoidance schemes (Spotlight 18);
Employment Benefit Schemes using fettered payments (Spotlight 17);
Plan Green – car benefit scheme (Spotlight 16);
Share Loss Relief schemes (Spotlight 15);
Stamp Duty Land Tax avoidance (Spotlight 14);
Property business loss relief schemes (Spotlight 13);
Taxing the rewards for work done (Spotlight 12);
Avoiding Income Tax on pay (Spotlight 11).

Spotlight 10 to 1.

Stamp Duty Land Tax avoidance (Spotlight 10);
Gift Aid with no real gift (Spotlight 9);
Investments to obtain trade loss reliefs -‘sideways loss relief’, (Spotlight 8);
Avoidance using Gift Aid (Spotlight 7);
Employer-Financed Retirement Benefits Scheme, (Spotlight 6);
PAYE and National Insurance contributions, Corporation Tax and Inheritance Tax: using trusts and similar entities to reward employees (Spotlight 5);
Contrived employment liabilities and losses (Spotlight 4);
Pension schemes: artificial surplus (Spotlight 3);
VAT: artificial leasing (Spotlight 2);
Goodwill: companies acquiring other businesses, carried on before 1 April 2002 by a related party (Spotlight 1).


  • Individuals

    • Liable to a penalty when failing to disclose a scheme to HMRC within five days of the scheme being made available or implemented. The first penalty is £600 a day. However, you may have to pay a penalty of up to £1 million.

Further, you remain liable for a further penalty of up to £600 a day, failing to disclose the scheme to HMRC after the initial penalty was forced.

  • As an employer

    • Who therefore remains involved in a tax avoidance scheme, then a penalty of up to £5,000 for each employee you fail to include in your end of year report may be imposed. Again, however, additional penalties of up to £600 a day may be imposed on each employee if you continue to fail to disclose once the initial penalty is imposed.

If you’re a promoter, you are liable to a penalty of up to £5,000 for each client to whom you fail to give the SRN. Further penalties of up to £600 a day per client may be imposed, however, if the failure continues after the initial penalty has been imposed.

If you’re a user of a tax avoidance scheme and fail to report the SRN to HMRC, you are liable to a penalty. The penalty is up to £5,000 the first time you fail to do this. Failure to report SRN risks a penalty of £7,500. Though if it is the third occasion, you risk paying £10,000 for each failure.

Penalties may also apply for non-compliance with other features of the DOTAS legislation.

Penalties For Tax Avoidance in the UK

HMRC is upping its game when imposing penalties on those involved in defeated British tax avoidance schemes. Further, HMRC remains steadfast in applying additional penalties for intentional tax avoidance compared to those issued for careless behaviour.

Currently, basic tax avoidance penalties are:

  • No penalty: if you exercised reasonable care dealing with errors and advising HMRC accordingly.
  • Up to 30%: should you have not exercised reasonable care, like failing to submit a tax return.
  • Up to 70% of you exercised intent.
  • Up to 100%, you intentionally defrauded HMRC.

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Tax Avoidance Schemes And Penalties, Tax Avoidance Schemes And Penalties, HBG Advisory
Tax Avoidance Schemes And Penalties, Tax Avoidance Schemes And Penalties, HBG Advisory
Tax Avoidance Schemes And Penalties, Tax Avoidance Schemes And Penalties, HBG Advisory
Tax Avoidance Schemes And Penalties, Tax Avoidance Schemes And Penalties, HBG Advisory