Report points to 'hard-core' group behind tax avoidance

Report points to 'hard-core' group behind tax avoidance

HM Revenue & Customs has revealed the details of tax avoidance schemes flagged by advisers and accountants in recent years. 

A research report carried out for HMRC and published last week (April 23) detailed schemes which were flagged to the taxman by tax agents interviewed in 2017, as part of the government's work to better understand the tax avoidance marketplace. 

The research, carried out by Kantar Public, consisted of interviews with 12 accountants or advisers with proximity to the market. It also suggested the tax avoidance supply chain was was being "driven primarily" by clients themselves and a small number of "well-known" promoters. 

The information gathered in 2017 showed the tax avoidance sector was being maintained by a "hard-core" group of as many as 20 promoters with a "long history of operation" in the UK and who were well known to HMRC. 

According to advisers and accountants interviewed by HMRC these promoters would "constantly come up with new schemes",  pro-actively marketing them and sending out glossy marketing materials and attempting to engage directly with clients.

The report stated: "A consistent picture of the avoidance marketplace supply chain emerged across the course of the research, with supply seen to be driven primarily by a small number of well-known promoters and demand driven largely by clients themselves."

On the demand side, the tax agents featured in the research claimed the marketplace was largely driven by clients who approached their accountant or tax adviser with a "desire for some kind of short-term financial gain".

The report noted these clients were often "operating under considerable financial pressure" and with a need for a short-term boost in profits. 

HMRC gave an overview of the types of tax avoidance schemes flagged by advisers and accountants in 2017, with remuneration schemes most commonly referenced.  

Remuneration schemes 

Employee benefit trust schemes are those in which money is placed into a trust and used to remunerate employees in the form of a loan. This type of scheme therefore avoids NI and PAYE deductions. 

Contractor loan schemes involve individuals that are employed by an offshore entity that only pays the minimum wage, with the remaining remuneration paid as a loan which is then written off.

Also on HMRC's radar were schemes which aimed to reduce NI payments by structuring bonuses received by directors as dividends and schemes in which shares were bought and sold in a company created specifically for that purpose, in order to claim tax allowance and avoid PAYE. 

Other schemes 

Property-based schemes used by property developers, in which money was paid into an offshore trust and then taken out as a loan to re-invest in property sites, were also mentioned.

One scheme flagged to HMRC related to capital gains tax and saw a client buy an insurance scheme and then report making a loss, against which a claim was made.

The taxman was also aware of schemes relating to investment in government designated Enterprise Zone Syndicates, aimed at incentivising investment in deprived areas in order to receive tax breaks.