HMRC are making more effort to crack down on marketed tax avoidance schemes. If you find yourself inadvertently caught up in this, our expert team of 25 years can help.
At a glance
- Receiving a letter from HMRC about a tax avoidance scheme can feel worrying, but most enquiries are civil and do not suggest criminal behaviour.
- Many people contacted were simply following advice from an umbrella company or adviser and had no idea the arrangement might later be challenged.
- The article explains, in clear steps, what to do next so you stay in control and avoid unnecessary stress or penalties.
- With early guidance from specialists, it is often possible to resolve matters calmly and bring clarity to what HMRC is asking.
Our expert tax team is here to help
If HMRC contacts you about a marketed tax avoidance scheme, it usually means they believe you may have used a tax arrangement that does not work under UK law. Most enquiries of this kind are civil, not criminal, and many people are contacted simply because their details appear on lists supplied by scheme promoters.
If you find yourself in this situation, the most important step is not to ignore the letter and to get early advice from a specialist team experienced in HMRC disputes.
At Francis Wilks & Jones, our tax disputes team has been helping individuals and business owners deal with HMRC for more than 25 years. The team is led by Andy Lynch, a former senior investigator at HMRC for over 18 years, giving clients unique and practical insight into how HMRC approach these matters.
Why is HMRC increasing action against promoters of tax avoidance schemes?
HMRC has been given stronger powers in recent years to tackle anyone promoting or selling marketed tax avoidance schemes. The government’s latest publication reinforces this approach and shows a clear intention to reduce the number of people drawn into arrangements that promise tax reduction but are unlikely to succeed.
- This activity is not targeted only at the promoters themselves.
- HMRC often writes to users of these schemes, even where the individual had no idea they were entering something HMRC would later challenge.
- Many people believe they were following legitimate advice or using a specialist payroll or tax service.
The aim of these letters is to help HMRC assess whether your tax returns are correct and to encourage early engagement. Treating the letter as routine can cause difficulties later, especially if HMRC believes there has been a delay in responding.
FWJ Takeaway: HMRC’s activity is part of a wide civil compliance programme. If you receive a letter, it does not mean you are suspected of criminal behaviour. It means HMRC wants to check the position and expects a clear response. We can help you prepare that response and reduce the potential for further enquiries.
What does it mean if you receive a letter suggesting you were involved in a tax avoidance scheme?
Receiving a letter from HM Revenue & Customs about a tax avoidance scheme can be unsettling. The phrasing can feel formal or even accusatory, but it is important to remember that HMRC use standardised wording. Many letters are sent simply because your name appears on documentation obtained from a promoter under their legal powers.
The letter may say HMRC believes you used, or may have used, an “avoidance scheme” or a “tax arrangement”. It does not automatically mean they have made a final decision. Instead, HMRC often start by asking for clarification or offering you the opportunity to correct any past returns voluntarily.
Depending on the type of scheme, HMRC may also issue:
- Information requests,
- “Nudge” letters,
- Follower Notices, or
- Accelerated Payment Notices (APNs) requiring you to pay tax upfront while the dispute is resolved.
These notices are all part of the civil compliance framework. They should be handled carefully and within deadlines.
With over 25 years of experience in HMRC disputes, our tax team at FWJ can guide you through what each letter means and the safest way to respond.
How do these schemes work and how might you have become involved without realising?
Many people become involved in marketed tax avoidance schemes without understanding their structure. Promoters often use terms such as “tax efficient”, “fully compliant” or “HMRC approved”, even where this is not accurate. Common examples include:
1. Disguised remuneration schemes
Disguised remuneration schemes frequently involve payments through trusts or loans instead of salary. The user may receive “loan advances” that are never expected to be repaid. HMRC now treats these arrangements as taxable income under specific legislation.
2. Contractor loan schemes
Often sold to contractors and freelancers, contractor loan schemes claim to increase take-home pay by splitting income between a small salary and large “loans”.
3. Payroll or umbrella arrangements
Some umbrella companies have offered what appear to be legitimate payment structures but turn out to include elements of avoidance. More detail can be found in our Payroll and VAT fraud defence guide.
4. Offshore trust or circular payment schemes
These may involve payments being made offshore or through complex intercompany transactions.
People are commonly told the scheme is safe, widely used, or approved. In reality, many of these arrangements fall squarely within HMRC’s anti-avoidance rules. It is therefore very common for individuals to feel they were misled or not fully informed.
FWJ Takeaway: Many scheme users acted in good faith. If you now find yourself contacted by HMRC, it is not a reflection of dishonesty but of the scheme’s design. Our support and advice can help you steer a course through what can be a stressful and frightening situation.
What steps should you take immediately after hearing from HMRC?
The most important step is to respond in a timely and accurate way. Ignoring the letter or delaying your reply can create unnecessary risks.
You should consider the following actions:
1. Read the letter carefully.
It sounds obvious, but understanding the type of letter you have received is critical. Not all HMRC communications have the same consequences or deadlines.
2. Avoid replying without advice.
In our experience, well-intentioned replies without the benefit of legal advice can often make the situation harder to resolve. HMRC may interpret statements in a particular way, especially if they relate to your understanding of the scheme. Always seek legal advice before responding.
3. Gather relevant paperwork
Collate key information as it is useful evidence and may be disclosable in due course. This may include:
- employment contracts,
- invoices,
- correspondence with the scheme provider,
- promotional material you received,
- payslips or loan documentation.
4. Avoid contact with the promoter
Promoters may give reassurance that the scheme “still works” or that HMRC letters are routine. This is rarely the case. Promoter advice often conflicts with your best interests. If you have been contacted by HMRC, do not contract the promotor until you take legal advice. It could make matters worse, especially if the promotor hasn’t been completely honest.
FWJ Takeaway: Responding correctly at the start can prevent financial penalties, protect your position and reduce the length of the enquiry. But let us help you do this – it can save huge amounts of money, time and stress
How the FWJ tax dispute team can help
If you have received a letter from HMRC about a marketed tax avoidance scheme, early support is essential. Our tax disputes team, led by former HMRC specialist Andy Lynch, has been advising clients in HMRC civil matters for more than 25 years.
We can help you understand the letter, respond safely and manage the process with HMRC.
Contact us today for confidential advice. Free initial consultation
