Tag Archive | "income tax avoidance"

What do you know about Tax Avoidance schemes? Really?

The government takes a hard line on Tax avoidance, this much we know. But it’s not only individuals who face the wrath of HMRC if they try to sweep a little of their income under the carpet.

The tax man is well aware of promoters of tax avoidance – or even evasion – schemes, too. They’ve even got a ditty little acronym for them: POTAS.

Just in case the tax man misses the odd scheme, it also has guidance on DOTAS. This tells you of your ‘obligation’ to bring such schemes to the government’s attention.

The two pieces of legislation are very much a double act, with the former referencing the latter heavily. Whilst both are extensive, it’s not a bad idea to familiarise yourself with the main points, which you can find on ICAEW.

Isn’t ‘grassing’ on my umbrella/accountant biting the hand that feeds me?

If you believe the person responsible for your bookkeeping is trying so hard to retain your business that they’re crossing the line, you can voice your concerns to the tax man.

And this is the moral dilemma that many contractors face. On the up side, the more of your income an umbrella company or an accountant can help you retain, the better, right? Well, not always; specifically not, when you get caught.

If you come under scrutiny from HMRC, as a contractor, it’s likely that the government will place you under the supervision of the IR35 team. There’s no use pleading ignorance, either.

Yes, you may have ultimate faith in your accountant to play by the book. But there’s no harm in keeping abreast of the most poignant matters pertaining to how much tax or NICs you pay. It will, after all, be you paying PAYE if you’re caught inside IR35.

Isn’t IR35 dead?

How long the IR35 team has left to run is the source of much industry debate. Its effectiveness in handling larger claims has been brought into question.

Likewise, industry commentators have noted the capacity of the IR35 team to handle only 250 cases at a time. That, in itself, is reason to suspect that Supervision, Direction and Control may be the legislation contractors need to concern themselves with most in the near future.

Whether it is SDC or IR35 you have to worry about, the tax man will always be on the lookout for tax avoidance. And the whole point of this article today is this:
when appointing an accountant or umbrella company, ask them if they’re a government-monitored promoter of a tax avoidance scheme.

The legislation exists to protect clients; as such promoters must disclose details to you if you ask. If they are monitored, they must tell “clients, potential clients and intermediaries” about their status. If you fall into that subset, be sure you know what you’re letting yourself in for if you appoint them to do your accounting!

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Government closes another tax avoidance scheme

Accountants may be interested to learn that the Government recently closed down another aggressive income tax avoidance scheme.

The scheme was being used by wealthy individuals to reduce the amount of tax they pay at the end of the year. It involved creating false transactions in order to generate tax relief from an artificial agricultural business. The land and property business owning it do exist, but the transactions do not. They are created solely to offset a loss against income, thus reducing the size of the individual’s tax liability.

New legislation was introduced into the Finance Bill on March 13th to close this scheme and this legislation came into immediate effect.

This is the third aggressive tax avoidance scheme that HMRC has unearthed recently and the Government realises that more similar schemes will probably emerge. Therefore it has introduced legislation to stop the artificial use of post cessation property relief.

The Exchequer Secretary to the Treasury, David Gauke, said the UK’s chief priority is to reduce the economic deficit and it is unacceptable for people to attempt to avoid paying their fair share of taxes. The Government has acted swiftly to close down this scheme and won’t hesitate to do the same as soon as it becomes aware of other tax avoidance schemes.

This latest move will not affect agricultural businesses that are trading legitimately and need to offset a loss from agricultural expenses against their general income.

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Image: Tractor Decay by idreamofdaylight

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