Tax Avoidance -
Is it legal and is it wise?
Call Bill on 07751720507
if you have doubts or a problem
WAMS Tax Ltd

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For a short free chat
about your problem with
Bill please phone him on
his 24/7 mobile
07751 720507

Bill Stevenson
can assist you with any
aspect of Direct tax (from
Income Tax and
Corporation Tax and
Capital Gains Tax  
Its a shame that the powers that be find it difficult to
talk about tax avoidance as something other than tax
evasion.

With all the Advance Payment notices and Follower
notices you would think that they had enough
powers to attack tax avoidance schemes without
resorting to the threat of tax geared penalties if you
don't pay up in 90 days.

Mind you they are not always correct in what they do
in issuing these notices and if you want matters
checked out give Bill a call on 07751720507.

Finance Bill 2012 closed some "grandfathering"
exceptions so that the tax noose is getting tighter. If
you are being sold the latest tax avoidance scheme
try asking the scheme peddlars  who has to pay the
tax if HMRC take you up for enquiry and defeat your
"wonderful avoidance scheme". If it is so good why
won't they cover your tax bill out of their fat fee? Just
think about it -
if it sounds too good to be true -yes
a 3.5% tax rate when you should be paying 40% or
even 50% -
it probably is.  

It is probably worthwhile to mention a couple of
topics that are currently being pursued by HMRC
below (but see to the side for the latest on
BN66) .

The first is the Film partnerships where matters
seem to be proceeding to appeal shortly in some
more schemes.
To remind readers this was the scheme where
household names from footballers to pop artists
(and even ordinary people who were enticed into the
schemes through greed) were investing funds in the
film partnerships on the promised outcome that even
the “tax refund” or “tax saved” they would achieve
would be more than the actual money invested.

Bill recently saw a letter from one of the scheme
vendors calling on the investors to pay their share of
defence costs. What a cheek. First they take a fat
fee and then when HMRC come a calling they say
look how little it will cost you for us to defend you.

The outcome is awaited with interest however
remember if it sounds too good to be true then
it probably is. Will you spend sleepless nights
worrying about it in the future.

Update - HMRC have won a landmark case
recently

The second scheme
is the
“Get 85% of your wages in your hand" scheme
where various “Payroll” businesses promise to leave
you with large amounts of your wages in your hand
to beat the taxman.

Bill is aware that various schemes are on the market
- and have been for numerous years in differing
versions-  that get you your wages with small
deductions (ranging from 15% to variously 20% to
23%) on wages or salaries that would normally be
into higher rates at 40% (or even 50% to be
reviewed). Of course the HMRC also know that there
are forums where "potentially poorer victims" of the
scheme peddlars chat about the latest victim having
to fork out to defend the scheme he paid for in a
moment of misplaced trust in his professional
adviser. Maybe the scheme peddlars should be
disclosing their bonuses in the same way as the
bankers.  

This is/was by various methods including
1. the “illegal”
drawing of monies from the UK
branches
of foreign banks without telling HMRC
about that part of the salary
through to
2. the ingenious
use of such things as loans and
Employee Benefit Trusts.

News of these arrive in the office every month by
calls from potential new clients that have received
the normal enquiry opening letter and Code of
Practice 8 from HMRC Special Investigations
.

Why should you be getting these letters when you
were assured that the “scheme” was 100% tax
compliant and had been approved by HMRC?

Let us get one or two things straight at the start

(a)        HMRC do not approve any marketed tax
avoidance schemes
and it is only because they
have not –as yet - issued an enquiry into the
scheme that you can get such misleading
assurances of validity in the vast majority of tax
avoidance schemes.

(b)        These days the
politicians and HMRC
spokespeople
are finding it more and more difficult
to
mention tax avoidance (which up to now has
been legal)
and tax evasion (that is illegal and can
result in prison) in completely separate sentences.

(c)        
Every avoidance scheme seller has -
with a few isolated exceptions - to register the
scheme with HMRC
as soon as they market it and
have any take ups. As a result they get a
registered number but that does not indicate
that HMRC are happy with the scheme
.

(d)        Clearly under these days of self assessment
there could be an almost
3 year delay (actually 34
months)
before you realise that HMRC are
fishing about
to uncover the whole sorry mess that
you have paid good money for. The timescale can
be seen from the following:-
i.        
Scheme operates from say 6th April 2011
and you gaily get 85% of your wages after
deductions (for example by means of a small salary
and a whacking big loan)

ii.        You have to
file a self assessment
tax return for the year ended 5th April 2012 by
31 January 2013
at the latest.

iii.        HMRC have until 31st January 2014 to open
an enquiry into your tax return and START fighting
your tax advantage.

iv.        
By that time you have got a potential 3
years of underpaid taxes
on top of which you will
have to pay INTEREST and maybe even potentially
a penalty.

(e)        If you haven’t put the money aside to pay
this tax and interest and penalty (up to 100% of the
tax)
how are you going to pay for it? – bang goes
properties and assets and in come the bailiffs or
even bankruptcy.

(f)        If (or should I say “when”) HMRC come a
calling on you for the tax
who is going to defend
you
– certainly not the scheme sellers who have
taken their nice fat fee at the outset (or their 5% of
the loans you got) and probably disappeared (or will
soon disappear when the going gets tough).

(g)        
Will you have the necessary spare
funds to fight your case
either at First Tier
tribunal or in the Courts

continued .................................>>>>>>>>>>
Remember that it will cost you a good deal
if HMRC defeat your scheme.
There will be :-
(ii)        
your costs of dealing with the
enquiry and
(iii)        
your interest on the unpaid tax
(iv)        
your penalties on the unpaid tax
(up to 100% of the tax again)

if HMRC manage to successfully challenge
the arrangements and then as they are
doing suggest that you were negligent in
not taking a second opinion all the way up
to the Tribunal..

This of course
does not get rid of the
stress
of not knowing how it is all going to
end up in three years time.

You might even
ask Bill for a second
opinion on the arrangements
but
remember if it sounds too good to be
true then it probably is
and will you
spend sleepless nights worrying about it in
the future?

Cautionary note - Also remember that if
you get involved in such schemes you
would have to fully reflect all the relevant
tax sensitive information in your tax returns.
Otherwise if HMRC decide to look at
matters, you have left them the window to
say that they have discovered that you left
relevant information off your tax return and
that tax has not been paid correctly as a
result.
You can depend on them to
consider penalties if you have
“hidden” anything or misdescribed
etc.
so Employment related loans need
loan benefits mentioned etc.
You also
need to fully relate all the transactions
your advisers don't want you to detail
to avoid future "discovery" or any
allegation of deliberate tax evasion
.  
In the event that you leave something off
you are potentially looking at 20 years as a
possible challenge period.  

Unfortunately some people find out too late
that HMRC are chasing their scheme.

If it is after HMRC have sent you the
letter
Then contact Bill on
07751720507
as he has the necessary
experience and expertise to

(h)        review matters to see whether
you have a chance of convincing HMRC
that there is some flaw in their processes
that will win the day (outside the "avoidance
issues") - i.e. technical reasons that they
cannot collect from you
(i)        
provide you with an appraisal of
the strengths and weaknesses and
possible alternatives
(j)        and if mutually agreeable -
argue
your case
with HMRC - again outwith the
"avoidance issues"
(k)        and
pursue matters to appeal
and First Tribunal
on technical issues as
regards their processes
.

But remember this will cost you money –
even though Bill’s fees are very cost
effective
and a lot less than you would
pay elsewhere for the experience and
expertise you would be getting. Be careful
that you are not throwing good money after
bad.

One opportunity that was available until
the end of May 2011
was for a voluntary
disclosure to HMRC
but there are always
going to be opportunities to make
disclosures and get matters dealt with
reasonably in Bill's view if HMRC have not
stumbled across you beforeheand..

If  you want Bill to take your disclosure
forward with HMRC through the
Credit Card
Sales Campaign- again being currently run
by HMRC - which is open to anyone (as
long as you accept credit cards for sales
and have not yet had the dreaded letter or
missed a previous tax disclosure
opportunity).  

If you are in doubt or want Bill’s help
please contact him on 07751720507


If you still have any lingering doubts about
how HMRC feel about tax avoidance just
take a look at the HMRC website at

Spotlights
  and in particular at Spotlights 6

There are also clearly forums where these
problems are aired (see
for example ) and
of course don't think that HMRC do not also
look at them.

Lastly a thought for the day - The
difference between tax avoidance and
tax evasion is the thickness of a
prison wall

Call Bill on 07751 720507 for a  free chat

Thanks to John Halsey of Ernst & Young
for taking the time to review the article and
pointing out the exception to registering
schemes with the DOTAS register. Shame
that another grandfathering loophole is
being closed in the 2012 Finance Bill and
just goes to show how the politicians and
tax authorities are closing in all the time.
The comments on this site
are personal views and
solely those of the author
who retains the copyright.
Each enquiry has its own
dangers and opportunities
that require full and detailed
consideration. Neither Bill or
WAMS Tax Ltd have any
responsibility for anything
you do or action you take
(or refrain from taking) after
reading the text and articles
unless you engage with the
company and Bill
Stevenson on a proper fee
paying client/tax adviser
basis.

The personal views of Bill
set out on this page do not
constitute tax advice and
are presented for
enjoyment only by the
reader

WAMS Tax Ltd - Bill
Stevenson - 07751 720 507
against HMRC being able to use
retrospective legislation to defeat
schemes, potential participants should
think even more carefully before signing
up for avoidance schemes.

Also few avenues will be left for
challenging HMRC's rights to assess. For
a review of the possibilities when all else
seems lost

call Bill on 07751720507 or

email on
bill.stevenson@wamstaxltd.com
View our details in the FreeIndex Tax Investigation directory.