Certain employers will attempt to reduce the amount of tax they pay by entering tax avoidance schemes. All intermediaries or advisers responsible for assisting businesses with their taxes have a responsibility to disclose any tax avoidance schemes in operation.
Here are five things about tax avoidance schemes every employer should know:
- You are obliged to inform HMRC about any tax avoidance scheme
Under the disclosure of tax avoidance schemes (DOTAS) rules, Her Majesty’s Revenue and Customs (HMRC) must be informed by users and promoters of any tax avoidance schemes in operation right from the beginning.
- HMRC is tightening the rules around tax avoidance schemes
The rules around tax avoidance schemes are being tightened, with certain schemes now having to be reported to HMRC that did not have to be in the past, so it is vital that anyone who deals with taxes is aware of this.
Promoters and users of tax avoidance schemes must now disclose tax avoidance schemes as soon as they are aware of them; an easy way to tell whether or not a tax avoidance scheme you are using has been disclosed is if the promoter has sent you form AAG6, which is notice of disclosure.
- HMRC is stepping up the hunt for illegal tax activity
Specialist tax avoidance taskforces are now in operation in the UK, hunting down illegal tax activity using state-of-the-art tools and intelligence systems.
- Those who fail to adhere to the rules will face penalties from HMRC
Users of tax avoidance schemes that should be disclosed under DOTAS that are not correctly reported to HMRC could face penalties starting at £5,000 per offence.
Promoters who fail to disclose a tax avoidance scheme that should be disclosed under DOTAS could, as part of the new rules for promoters of tax avoidance schemes, be sent a conduct notice by HMRC, and if they do not rectify their behaviour they risk being publicly named, as well as being obliged to inform clients that they are being monitored. Failure to comply with these conditions could result in fines of up to £1million.
For more information about tax avoidance scheme penalties, take a look at the guidance for promoters of tax avoidance schemes.
- Working with HMRC is in your best interests
The vast majority of tax avoidance schemes simply do not work; HMRC wins around 80 per cent of tax avoidance cases taken to court, with many promoters and users settling long before that stage. Working with HMRC to providing the necessary information in a timely manner prevents organisations and individuals from tarnishing their reputations, as well as incurring penalties, further down the line.
You can report a tax avoidance scheme by calling the HMRC tax avoidance hotline on 03000 588 993 or by filling in a tax avoidance form online.