29/03/19

UK: HMRC wins £40 million battle against tax avoidance promoters.

As published on gov.uk, Wednesday 27^th March, 2019.

HM Revenue and Customs has won a legal case over tax avoidance scheme promoter Hyrax Resourcing Ltd, which will help the tax authority collect over £40 million in unpaid taxes.

The victory over Hyrax means the promoter now has to disclose the details of their tax avoidance scheme to HMRC, along with the names and addresses of 1,180 high earners who used it.

If Hyrax fail to provide the required information to HMRC they could face a penalty of nearly £6 million, as well as £5,000 per day for not fully disclosing the scheme.

The scheme promoted by Hyrax was a disguised remuneration avoidance scheme which worked by paying scheme users in loans so they could avoid paying Income Tax and National Insurance on their earnings.

Scheme users were paid just enough to comply with the National Minimum Wage. The rest of their income was made up in loans which were transferred to an offshore trust in Jersey. The amounts received under loan agreements were not declared as income on the scheme users tax return, meaning they didn’t pay tax on all their earnings.

Mel Stride, Financial Secretary to the Treasury said:

“HMRC is cracking down on the unscrupulous promoters who sell these highly contrived tax avoidance loan schemes. Promoters need to take note of this decision and make sure they contact HMRC urgently about schemes they haven’t yet disclosed.”

The First-tier Tribunal agreed with HMRC that Hyrax Resourcing Ltd had not complied with the Disclosure of Tax Avoidance Schemes (DOTAS) rules, which requires promoters to tell HMRC about the schemes they sell.

The Hyrax scheme was a successor to the K2 arrangements which became widely known about in 2012.

New legislation has been introduced every year since 2014 to help HMRC take on promoters and enablers of tax avoidance schemes.

Over 100 promoters and others involved in tax avoidance have been investigated by HMRC in recent years.