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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). Your accountants and any other party may be held accountable by the HMRC.  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 to schemes earlier;
  • see 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, then 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. 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, then stay clear. If so, dig further. How credible are they? Are any of their clients under HMRC investigation? 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, therefore, 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, then ensures the best use of reducing tax payable legally. Tax sheltering is similar. Havens, therefore, are jurisdictions used to enable taxes to be reduced, not hidden.

Evasion is illegal. Corporations used evasion, individuals, trusts and other entities so that they may 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 would like 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 therefore offer tax advantages.

Tax Avoidance Schemes And Penalties – HMRC Spotlight Schemes.

These spotlights are to warn you away from, therefore, using 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 then 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 in respect of 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. Failing to report SRN risks a penalty of £7,500. Though if it is the third occasion, you, therefore, risk paying £10,000 for each failure.

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

Companies who require support during the pandemic. Please read,’suggestions for companies during the pandemic’.

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