HMRC has set out its policy on witholding repayment claims in tax avoidance cases, saying its new guidelines are designed to stop tax avoiders from acquiring an advantage over those who do not seek to get around the rules say Harris & Co chartered accountants Northampton who specialise in accountancy services for small businesses.
The HMRC Brief 28/13 acknowledges that HMRC investigations in tax avoidance cases can take some years to resolve, particularly if a case goes to court, and states that: ‘The small minority who engage in tax avoidance should not gain a tax advantage during the period from the tax due date to the time when we complete our enquiries and resolve any dispute. It is important that anyone who is considering using a tax avoidance scheme should be aware of the steps we will take to make sure that they will not benefit from it.’
These will include not only challenging the permanent tax result that the avoidance scheme claims to produce, but HMRC says it will also be seeking to deny interim or temporary "cash flow" benefits from engaging in avoidance, particularly where a scheme claims to give rise to a tax repayment or some other form of personal tax relief.
HMRC’s guidance says: ‘We are not referring to National Insurance Contributions, where claims for repayment do not normally arise as a result of avoidance schemes. We are referring rather to examples such as claims made outside of tax returns, where we may enforce payment of a tax debt where the claim would otherwise have been given effect by discharge or set-off.’
In circumstances where HMRC is satisfied that a claim for discharge or set-off does not depend (or does not wholly depend) on tax avoidance, the department says it will work with taxpayers and their agents with a view to giving appropriate provisional effect to the claim. The same approach will apply in situations where HMRC judges a scheme is designed to inflate or accelerate a claim to relief artificially.
If HMRC does decide to withold repayment claims or withhold giving effect to claims to other forms of personal tax relief, the tax avoidance scheme in question will be subject to HMRC"s anti-avoidance governance process.
HMRC warns that in some instances, notably the use of mass marketed tax avoidance schemes, it may take the full period of enquiry to establish whether or not any such claims will be considered valid. However, HMRC says that scheme users or their agents can contact the department before an enquiry is opened into their relevant return or claim, and HMRC will confirm whether it has withheld a repayment or other personal tax relief because the department believes it relates to a tax avoidance scheme which being challenged or likely to be challenged.