What is a Tax Avoidance scheme?

A Tax Avoidance Scheme is a policy, scheme or arrangement which seeks, directly or indirectly, the non-payment of tax by exploiting a tax loophole to reduce an individual or business’ tax liability or the wholesale avoidance of this tax liability. 

A Tax Avoidance Scheme will normally be promoted by a third party and facilitated by a Trust, which (simply put) would receive the employee’s income as a loan and remit it on to the employee, who would not repay the loan. 

Please see our website here which describes the difference between tax planning and tax avoidance.

Tax Avoidance Schemes have become very popular in recent years by using loans (which would not ordinarily be taxable) to third party trusts, who then lend it on to the employee (thus avoiding the requirement to pay income tax) via an Employee Benefit Trusts.   

This is a very simplistic description but as a result new legislation has been introduced which will impose loan charges of 50% where such Tax Avoidance Scheme loans exist as at 5 April 2019.

As a result, the employee has the option of either disclosing their Tax Avoidance Scheme, and facing penalties and interest that may be payable, or awaiting enquiries and the possibility of a loan charge of 50%.  However, for most tax earners, the penalties upon disclosure may annul any benefit when compared to the threat of the loan charge.

More importantly, the employee also faces the risk that such taxes will be backdated up to 20 years and this could have huge financial consequences for that individual.

At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, including Accelerated Payment Notices, Personal Liability Notices, VAT Security or any other claim - including appeals to Tax Tribunals or insolvency claims by Liquidators.

Please call any member of our Tax Disputes team for your consultation now on 020 7841 0390.  Alternatively email us with your enquiry at info@franciswilksandjones.co.uk and we will call you back at a time convenient to you.