HMRC’s crackdown on tax avoidance schemes: What you need to know
HM Revenue and Customs (HMRC) has released a list of over 1,000 tax avoidance schemes it believes are deliberately designed to reduce tax liabilities. This move is part of a wider government effort to combat tax evasion and ensure fair contributions from all taxpayers.
Accelerated Payment Notices: What Are They?
Once granted new legal powers, expected to come into effect this week, HMRC will issue Accelerated Payment Notices (APNs). These notices require taxpayers to pay disputed taxes upfront, without waiting for a court ruling. HMRC has up to two years from the Finance Bill’s Royal Assent to issue APNs. It is estimated that approximately 33,000 individuals will receive these notices, resulting in billions of pounds in tax demands.
Recipients will have 90 days to pay, unless they formally dispute the validity of the notice. Refunds will only be issued if the court later rules in the taxpayer’s favor.
Understanding Scheme Reference Numbers (SRNs)
Each tax avoidance scheme on HMRC’s list has a designated Scheme Reference Number (SRN). Taxpayers must include the relevant SRN in their tax return. If your tax return contains an SRN, you may be subject to an accelerated payment demand.
Spotlight on Ingenious Film Partners 2
One high-profile scheme on HMRC’s list is Ingenious Film Partners 2. Marketed as a legitimate investment in British cinema, Ingenious Film Partners 2 reportedly generated excessive tax relief for its investors. While investors backed well-known films like X-Men: The Last Stand, Sunshine, and Hotel Rwanda, HMRC claims the scheme was structured primarily to reduce taxable income.
How the Scheme Worked:
- Investors committed a minimum of £36,000.
- Ingenious loaned an additional £64,000, increasing the total investment to £100,000.
- Losses from the films were declared, resulting in approximately £90,000 in tax relief.
- High-income taxpayers could offset these losses against their tax liabilities, securing quick tax refunds.
The legality of Ingenious Film Partners 2 is set to be reviewed by a tax tribunal in November.
Industry Response and Ongoing Disputes
Ingenious maintains that it genuinely supports the British film industry and claims its investment schemes have generated over £1 billion in taxable income. The company argues that the government’s actions are unfair and a blatant attempt to boost tax revenue. Investors have also expressed concerns about what they perceive as retrospective taxation.
With legal battles expected to intensify, taxpayers involved in similar schemes should seek legal advice and prepare for potential disputes with HMRC.
Final Thoughts
HMRC’s publication of tax avoidance schemes and the introduction of Accelerated Payment Notices signal a firm stance against tax evasion. Taxpayers are urged to ensure compliance and stay informed about any schemes they may be part of. For those impacted, legal guidance is recommended to navigate the complexities of tax law.
