HMRC releases guidance on its approach to tax avoidance

HMRC has issued some helpful guidance for businesses which outlines their approach to tax avoidance and lists ‘symptoms’ of schemes likely to be deemed ‘aggressive’ and potentially subject to enquiry.

We have highlighted some of the key points for businesses seeking clarification on tax planning issues, but click for the full leaflet ‘Tackling Tax Avoidance’.

What is tax avoidance?
Tax avoidance is bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage.

Tax planning involves using tax reliefs for the purpose for which they were intended.
If a scheme relies on concealment or providing false information to HMRC, it will amount to tax evasion and may attract serious sanctions, ranging from financial penalties to a criminal conviction.
Tax planning to be wary of (not a full list)

• It sounds too good to be true.
• Artificial or contrived arrangements are involved.
• It seems very complex given what you want to do.
• There are guaranteed returns with apparently no risk.
• There are secrecy or confidentiality agreements.
• Upfront fees are payable or the arrangement is on a no win/no fee basis.
• Taxation of income is delayed or tax deductions accelerated.
• Tax benefits are disproportionate to the commercial activity.
• A tax haven or banking secrecy country is involved without any sound commercial reason.
• Tax exempt entities, such as pension funds, are involved inappropriately.
• It involves money going in a circle back to where it started.
• Low risk loans to be paid off by future earnings are involved.
• There is a requirement to take out insurance against the failure of the tax planning to deliver the tax benefits.

Of course, if clients have queries on any of the above that the leaflet does not answer, they should call Adams Moore.