Tax avoiders to face warning shot

 

Word Tax on Scrabble board

Tax avoiders to face warning shot 

Hundreds of suspected tax avoiders are to receive letters in the coming weeks warning them that their financial affairs are facing special scrutiny.
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    Tax avoiders to get warning shot from HMRC

    Tax protestor Tax avoidance and evasion has led to a number of protests by campaigners
    Hundreds of suspected tax avoiders are to receive letters in the coming weeks warning them that their financial affairs are facing special scrutiny.
    HM Revenue and Customs (HMRC) is sending letters directly to 1,500 people who it believes have signed up to one particular avoidance scheme.
    The correspondence, the first of its kind, is a pre-emptive strike before the scheme's legality is challenged.
    The National Audit Office said such schemes cost the UK more than £10bn.
    In a report, published on Wednesday, the watchdog said HMRC was dealing with a backlog of 41,000 cases of aggressive tax avoidance involving individuals and small companies.
    Penalties In an attempt to tackle the backlog, HMRC is sending out four versions of the same letter in a pilot scheme. The first wave of about 700 will start landing on doormats on Saturday.
    One version says: "You are in the small minority of people who have made the deliberate choice to avoid tax. We focus our resources on this small minority. The choice that you have made changes the way we view your tax affairs.
    "Our Specialist Investigations Unit will be carrying out a full investigation into this scheme and they will open an enquiry into your tax affairs."
    It goes on to suggest that people who use the scheme could find that they have to pay the outstanding tax, plus interest, and - in certain circumstances - could face a financial penalty.
    It provides contact and payment details for people if they wish to pull out of the scheme immediately and pay up.
    No details have been revealed about the recipients of the letters, who live across the UK. Although they are not all thought to be among the mega-rich, one tax expert said he would be surprised if there were no big names among them.
    'Reality check' Tax avoidance schemes are legal but, in this case, HMRC is saying that it has good reasons to put it under the microscope.

    Extracts from the tax letters

    We are committed to challenging aggressive tax avoidance, and we will do so through the courts where appropriate. If we do this then it will lead to years of uncertainty about your tax affairs, and mean considerable additional cost to you. We are already challenging similar schemes and we have a very successful track record in the courts with schemes of this type.
    Your decision to use a scheme such as this means that we will treat you as a higher risk customer. Therefore we will monitor more closely your tax affairs in the future.
    .......
    Paying your taxes in full is the right thing to do. Not paying tax reduces our public finances. We all lose out on essential public services such as roads, the NHS and schools.
    In the new tactic, it is writing to people directly to give them the opportunity to get out of the scheme, which has not been named publicly.
    An HMRC spokesman admitted that these people were free to argue because no ruling had yet been made about the legality of this scheme.
    Normally, HMRC would contact the promoters of these schemes, rather than the individual investors themselves, to tell them that they will be challenging the scheme at a tax tribunal.
    Tax avoidance schemes have hit the headlines in recent months.
    They have included the Jersey-based K2 scheme which featured the membership - now cancelled - of comedian Jimmy Carr.
    More than 1,000 people were thought to be using the scheme which was said to be sheltering £168m a year from the Treasury.
    Under the K2 scheme, an individual resigned from their company and any salary they subsequently received was paid to an offshore trust which then lent investors back the money. As this is a loan that can technically be recalled, there was no income tax due.
    HMRC has been criticised for failing to properly curb aggressive avoidance schemes.
    The National Audit Office's report said that between 2004 and 2011, about 2,300 avoidance schemes were disclosed to the tax authorities, with more than 100 new schemes emerging in each of the past four years.
    HMRC said it had successfully challenged 40 schemes in two years, but MPs said that the UK tax authority must do better in tackling "mass-marketed" schemes.
    Chas Roy-Chowdhury, of the ACCA tax body, said that the letters were a good way of HMRC trying to get the numbers of these schemes down to "more manageable levels".
    He said that the correspondence would be a "reality check" for many recipients.
    "This is the first time HMRC is contacting people directly and putting down in black and white exactly what the position is for them. It will make people think twice," he said.
    "I hope it does bring down the numbers and restore some faith in the tax system."
    He said it was also a good way of pointing out that much of the accountancy trade was not involved in promoting these schemes.COPY http://www.bbc.co.uk

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