Where is Tax Anti-avoidance going?

At Ward Goodman we come across many different tax schemes. THIS IS NOT AN AREA FOR THE FAINT HEARTED.

Anyone interested in tax schemes needs to be fully aware of the Governments changing approach to what they regard as tax avoidance and the potential consequences.

In 2005 the HM Revenue and Customs set up the Anti-avoidance Group (AAG). In the current climate of poor economic trading, resulting in low tax collections, and a massive public deficit, the AAG has never been more active.

There are 95 dedicated staff members running the AAG with the aim of preventing tax being avoided by early prevention of schemes, detection and counteraction, usually by advising Ministers on changing the law and/ or litigation.

For most taxpayers, organising their tax affairs to pay the right amount of tax by proactive planning is sensible. This is not the type of anti-avoidance that the AAG are interested in (at the moment!). However, there is a market in tax avoidance schemes which exploit loopholes in the law, usually arising as a result of poor drafting, and it is these that attract the most attention from the AAG.

The AAG has started highlighting ‘risk indicators’ that will certainly result in a challenge from HMRC. Every tax avoidance scheme is now required by law to be disclosed, which gives the AAG an immediate heads up and enables them to take whatever preventative action or litigation it deems fit. A consultation document was released in the Pre Budget Report in December 2009 proposing greater penalties and a widening of the information required to be disclosed on scheme promoters as well as on scheme users.

In this current climate, a scheme user must expect to be the subject of an enquiry. These enquiries can be expected to be protracted and at worst result in the user losing all the benefits of the scheme, whilst suffering the initial costs of the scheme and the costs of dealing with the enquiry. However, despite the clear risks, there are still those that can find this area attractive given the potential for significant tax savings.

Talk to an expert tax consultant for free. Call John Davies on 01202 875900

To find out more about any of these stories or
Ward Goodman please contact 01202 875900