HMRC are now focusing on what they term “tax avoidance schemes”. These are transactions which HMRC believe have been entered into for the primary purpose of reducing tax.
Legislation has been introduced so that “schemes” which fall within certain criteria must be disclosed and given a DOTAS number. This number must then be reported on the tax return. Tax schemes are generally investigated by Specialist Investigations (Fraud and Avoidance) and under internal policy are dealt with under HMRC’s investigations powers. Anybody participating in a tax scheme should be aware that an investigation is likely to follow.
Even where a DOTAS number has not been given HMRC may regard certain transactions as a “tax avoidance scheme” and the same procedure will be followed by HMRC in respect of the investigation.
Generally a scheme will have been developed by someone or a business which promoted the scheme. Often these “promoters” will have known that an investigation was likely and will have made sure that the appropriate procedures and funding have been put in place to ensure that the investigation is dealt with on behalf of the participants.
However sometimes participants find themselves in the position of having to deal with matters themselves. This can arise because either procedures have not been put in place or the promoter is, for whatever reason, unable to fund the investigation.
Our team have an unrivalled reputation for dealing with investigations in this area and in the past 2 years have settled 7 major investigations into marketed tax avoidance products. These settlements led to the agreement of significant repayments of tax to the participants.
Although litigation is often best avoided, as a matter of public policy HMRC also seek to litigate many tax schemes. Our team have the experience to take forward litigation, where appropriate, and either run the litigation internally or work closely with a number of legal firms recognised as leaders in this field.
Cost is often a factor both in dealing with the investigation and also litigation. Our team has successfully put together a number of large group actions ranging from 50 to 500 participants therefore spreading the cost and making dealing with these issues cost effective.