The Scottish Mail on Sunday

Tax avoiders face massive penalties after landmark case

- By ALEX HAWKES

TAX avoiders who try to use complicate­d schemes to cut their bills could face huge penalties after a landmark legal case.

A tax tribunal found that two company directors had been ‘negligent’ in joining an avoidance scheme.

The case adds a new weapon to the armoury of the tax authoritie­s, who are staging a wide-ranging clampdown on avoidance and targeting boutique accountanc­y firms that sell tax plans.

In the past, those entering into avoidance schemes have only had to face the risk that the plans did not work and consequent­ly having to pay the tax they had been trying to avoid. This made joining a tax scheme a one-way bet.

Many schemes have been struck down by tribunals, with the members forced to pay the tax they sought to avoid, but facing no further penalty.

The landmark case was brought against two company directors who entered into a scheme put together by specialist tax firm Montpelier.

The aim was to avoid paying capital gains tax on the sale of a business and property assets.

The two, Bernard Litman and Ann Newall, notified tax authoritie­s they had used the scheme and told the tribunal they relied on their profession­al advisers when submitting their returns. But the tribunal ruled that the pair should have checked that the plan from Montpelier actually involved money changing hands.

The two will have to pay penalties of 10 per cent of the tax due, or £11,800 each. They have already paid the £118,000 capital gains tax bills, plus interest.

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