HMRC – Warning to Tax Avoiders

HM Revenue and Customs (HMRC) have announced that they are sending letters directly to 1,500 people who it suspects are avoiding tax by signing up to one particular avoidance scheme. warning them that their financial affairs are facing scrutiny.

The correspondence is a pre-emptive strike before the scheme’s legality is challenged.

The National Audit Office said such schemes cost the UK more than £10bn

HMRC have been dealing with a backlog of 41,000 cases of aggressive tax avoidance involving individuals and small companies and in an attempt to tackle the backlog, HMRC is sending out four versions of the same letter in a pilot scheme. The first wave of about 700 will start landing on doormats on Saturday.

One version of these letters say: “You are in the small minority of people who have made the deliberate choice to avoid tax. We focus our resources on this small minority. The choice that you have made changes the way we view your tax affairs.

“Our Specialist Investigations Unit will be carrying out a full investigation into this scheme and they will open an enquiry into your tax affairs.”

It goes on to suggest that people who use the scheme could find that they have to pay the outstanding tax, plus interest, and – in certain circumstances – could face a financial penalty.

It provides contact and payment details for people if they wish to pull out of the scheme immediately and pay up.

No details have been submitted regarding the recipients.

Tax avoidance schemes are legal but, in this case, HMRC is saying that it has good reasons to put it under the microscope and are applying a new tactic.  HMRC is writing to people directly to give them the opportunity to get out of the scheme, which has not been named publicly.

An HMRC spokesman admitted that these people were free to argue because no ruling had yet been made about the legality of this scheme.

Normally, HMRC would contact the promoters of these schemes, rather than the individual investors themselves, to tell them that they will be challenging the scheme at a tax tribunal.

More than 1,000 people were thought to be using the scheme which was said to be sheltering £168m a year from the Treasury.

The National Audit Office’s report said that between 2004 and 2011, about 2,300 avoidance schemes were disclosed to the tax authorities, with more than 100 new schemes emerging in each of the past four years.

HMRC said it had successfully challenged 40 schemes in two years, but MPs said that the UK tax authority must do better in tackling “mass-marketed” schemes.