Avoid the ‘ too good to be true’ tax schemes
PEOPLE ARE being warned to steer clear of “too good to be true” tax avoidance schemes which set up complex arrangements for paying their income.
HM Revenue and Customs ( HMRC) and the Advertising Standards Authority ( ASA) said they have launched joint action to help protect people from being presented with misleading adverts which may tempt them into tax avoidance.
They said promoters are being required to be clear about the potential consequences of tax avoidance in any online advertisements.
Immediate sanctions include having their paid advertising removed from search engines and follow- up compliance action, which can include referrals to Trading Standards.
Tax avoidance usually involves bending the rules to artificially reduce the amount of tax that someone pays in a way which is not in the spirit of the law, and it comes with big risks.
HMRC said that while using or selling avoidance schemes is not in itself a criminal offence, it will always consider whether the scheme involves fraud – for example, because it relies on false documents or misrepresenting the facts.
Tax officials will investigate with a view to a criminal prosecution of the promoter and/ or taxpayer where appropriate.
Promoters of such schemes are hugely opportunistic, the tax authority said.
Over the past year, for example, NHS workers who returned to the front line to battle Covid- 19 have been targeted.
HMRC has also launched a drive to raise awareness about the pitfalls of tax avoidance schemes.
They can involve a variety of contrived ways to pay people an income, for example receiving earnings as loans made via an offshore trust which has been set up as a tax haven.
HMRC has also seen avoidance
schemes where workers are paid their income in the form of what are said to be grants, salary advances, credit facilities, and annuities. Schemes promise to put money in the worker’s pocket without them having to pay tax on it.
The revenue body said that if people are asked to sign lots of legal documents just to set up payment arrangements for their salary, they should make sure they know what they are agreeing to.
They should get independent advice from a reputable tax agent
or speak to a tax advice charity. No legitimate employer would have a problem with someone checking, HMRC said.
In 2018/ 19, HMRC estimates that around £ 1.7bn was lost to tax avoidance.
HMRC believes around 30,000 people and 2,000 employers were involved in avoidance schemes in 2018 to 2019. People aged 41 to 60 were the most likely age group to be involved.
Jesse Norman, the Financial Secretary to the Treasury, said: “The Government has made clear its determination to clamp
down on the promoters of tax avoidance schemes.
“Today HMRC and the ASA are taking an important further step in this direction by action against misleading advertisements by promoters.
“As always, we would encourage people to pay close attention to HMRC’s warnings not to enter tax avoidance schemes. If it looks too good to be true, it almost certainly is.”
Jim Harra, chief executive and first permanent secretary of HMRC, said: “We’re doing our part to close down these schemes and make it difficult for promoters, but we need the public to play their part too.
“You really don’t need to be a tax expert to spot an avoidance scheme – anything that sounds too good to be true almost certainly is, and anything which claims you can take home, say, 90 per cent of your pay, or asks you to sign up to loans from an offshore trust just so you can be paid, is something to steer clear of.
“That’s why we’re starting a big push to encourage taxpayers to steer clear of tax avoidance schemes.”