HMRC set for tough action over tax on closed schemes
The first demands for tax payments for schemes that have been closed down or are disclosable under anti abuse rules could be sent out next month, with first payments due in November say Harris & Co accountants Northampton #accountantsnorthampton
The Treasury has acknowledged that the new measures to counter aggressive and contrived tax avoidance schemes are likely to result in a flood of litigation involving cases with about £7.2bn of total tax in dispute.
In the final reading of the Finance Bill last week, MPs gave their final support for reforms outlined in the Budget which will allow HMRC to issue tax demands to investors in schemes which are disclosable under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, or subject to the General Anti-Abuse Rule (GAAR) or in circumstances where there is a final judicial ruling in another case which would deny the tax treatment adopted.
As a result, taxpayers who have invested in high profile tax avoidance schemes which have now been closed down, could find themselves served with demands for tax payments which could go back 10 years.
Speaking to the Public Bill Committee David Gauke, Exchequer Secretary to the Treasury, said the measures, which come into law next month, ‘are expected to prompt a range of legal challenges, including judicial review proceedings, an increase in closure applications to the tribunal and disputed enforcement activity.’
As a result, the government is taking a number of steps to create what Gauke called ‘flexible legal resource options’ to meet the rise in demand.
HMRC is expected to publish a list of the schemes affected by the changes before the Finance Bill becomes law and has said it estimates that accelerated payment notices will be issued to 33,000 taxpayers. HMRC estimates the notices will result in receipts of £340m this year, £1.3bnn in 2015-16, £1.3bn in 2016-17, £750m in 2017-18 and £385m in 2018-19.
Gauke said taxpayers could be made bankrupt if they took deliberate action to put their assets out of reach, but also indicated that it would be possible to make arrangements with HMRC to allow for extra time to pay the debt
‘The question of time to pay and how many arrangements HMRC expects to agree is difficult to answer. It will depend on the specific circumstances of individual taxpayers. In cases of genuine hardship, HMRC will consider alternative payment arrangements, as it does with any debt. The priority in cases of genuine hardship will be to get people on to a payment track so that the debt is paid as quickly as possible,’ Gauke said.
Responsing to a question from the committee about the likely effectiveness of the new approach, Gauke said: ‘This is a major new development. If a promoter tries to pull the wool over HMRC’s eyes, the likelihood is that they will quickly find themselves in this regime, having to improve their behaviour or face stiff penalties.