HMRC’s fight against aggressive, artificial and abusive tax avoidance has received a triple boost, with three recent court successes in cases heard in July.
The first featured a tax avoidance scheme undertaken by a taxpayer who had sold his business at a gain of £10,000,000. The scheme, intended to avoid tax on the gain entirely, cost the taxpayer £200,000, and according to the Court of Appeal “did not work” Not money well spent, then.
The second success concerned HMRC successfully countering the use of a number of tax avoidance schemes by the directors of Sloane Robinson Investment Services, with roughly £13 million of tax at stake. Readers may care to note another downside to undertaking aggressive tax avoidance schemes; potential loss of taxpayer anonymity as a result of court proceedings. Would you trust a firm that undertook failed aggressive tax avoidance schemes to have anything to do with your investments?
The third case featured a scheme designed to exploit a mismatch between two aspects of the UK tax regime, relating to interest on UK government bonds. Well over 100 individuals had taken this scheme up, with the total tax at stake estimated at £100 million.
So a pretty good month’s work for HMRC’s anti avoidance campaign. HMRC spokesman Jim Harra, Director General of Business Tax, was magnificently bullish in victory, and his comments merit repetition in full:
“(HMRC’s victories) send a clear message to tax avoiders – HMRC will challenge tax avoidance relentlessly and we will beat you. We have now had three major court successes in avoidance cases in the last month alone and I hope this sends a very clear message. These schemes don’t come cheap, you carry a serious risk that you’ll end up paying the tax and interest on top of a set up charge which can run into the hundreds of thousands of pounds. So you have to ask yourself whether it’s really worth it. These were complex cases which show HMRC’s experts doing what they do best, delivering great results for the UK”.
To borrow a line from Paddy Power: “we hear you, Jim Harra”.
At this point I fear I also have to quote Exchequer Secretary to the Treasury David Gauke, who recently made himself sound a bit of a twit over the payment in cash issue, but pluckily set out on the long and difficult path to redemption in my eyes with the following comment:
“The government is committed to tackling aggressive tax avoidance schemes and HMRC will pursue their users through the courts where necessary. These three HMRC wins are very welcome, demonstrating that if an avoidance scheme promises results that seem too good to be true, they probably are.”
Well said, Mr Gauke; perhaps your cash payment comments were an aberration after all.
The wind of change is definitely blowing through the world of tax as regards aggressive tax avoidance schemes. A combination of media interest, an apparent shift in the attitude of the courts, a clear intention on the part of HMRC to litigate aggressive schemes (resulting in loss of taxpayer confidentiality), adverse public and professional opinion and the impending General Anti-Abuse Rule may well be deterring significant numbers of potential users of such schemes from undertaking the substantial investment and risk involved. It may well be that only the most hard-boiled of tax avoiders will now be prepared to let themselves in for all that goes with an aggressive tax avoidance scheme, in which case the government and HMRC’s campaign against abusive tax avoidance is off to a most encouraging start.