When you sign for a tax avoidance scheme, there are many risks that you can face. The risks can be in terms of both monetary costs and also criminal prosecution and conviction.
Regarding the tax avoidance, HM Revenue & Customs (HMRC) has published some things the avoidance promoters do not warn you about.
1. Most schemes do not work.
Tax avoidance is legit. However, if the scheme does not work, you tax return will be incorrect which is not accordance with the law. As a result, you will be legally obliged to pay tax that is due. You could be charged penalties if you don’t.
2. You could end up paying more tax than you’re trying to avoid.
Avoidance schemes can be very complex. They can cause unintended additional tax consequences. Even if the promoter tells you otherwise, the fess you pay him do not account towards your tax bill. And, you will have to pay a lot more money than you are trying to avoid.
3. You may have significant legal fees to pay.
If the tax avoidance scheme is taken to litigation, you may have to pay a large sum. When your promoter asks you to pay into a ‘fighting fund’ up front and if you do so, the fess will be skyrocketing.
4. You could face criminal conviction.
In case, if you mislead or hide information from HMRC intentionally, you could be prosecuted and convicted.
5. You could face publicity as a tax avoider.
If you are named in court papers when the case goes to court or in public registers, you will be called as a cheater by the media.
6. Your scheme is never HMRC approved.
If you think getting avoidance Scheme Reference Number from HMRC mean the department has cleared the scheme. Then, you are wrong. It is because when a scheme shows signs of being designed to avoid tax, HMRC issues these numbers.
7. You could be marked out as a high-risk taxpayer
If you deploy a tax avoidance scheme, you will strike out as a high-risk taxpayer to HMRC. This means all of your tax affairs will be closely examined in future including the claim for relief.
8. HMRC is likely to beat your scheme in court.
If HMRC taxpayers and promoters take avoidance schemes to court, chances are HMRC will win most of the cases.
9. The risk is all your own.
There is a less tax that a tax promoter will be giving you a guarantee about a scheme. If in case HMRC starts investigating your tax affairs, they will not support you. It is because some promoters set up only to sell the scheme, and then separate.
10. You’ll have to pay the tax up front anyway.
According to new legislation, disputed tax must be paid up front. This means you no longer get a cash-flow advantage when HMRC investigates your scheme.
These statement made by HMRC clearly sets the record straight that the tax avoidance who don’t change their behaviour will face some serious actions.
If you want to discuss about tax avoidance and other issues, you can get in touch with our accountants today.