03/05/23

UK: HMRC names and shames two offshore tax avoidance schemes.

As published on accountancyage.com, Wednesday 3 May, 2023.

HM Revenue and Customs (HMRC) has revealed that two Belize registered companies, Minerva Services Ltd and Buckingham Wealth Ltd, have been promoting a tax avoidance scheme in the UK known as the Umbrella Remuneration Trust (URT).

HMRC stated that the schemes, who share the same official business address in Belmopan, the capital of Belize, used complex offshore financial arrangements that enabled Income Tax and National Insurance contributions to be avoided. The Trust received contributions from UK companies, self-employed individuals, and scheme users who claimed their contributions as a deductible Corporation Tax or Income Tax expense. When the money was transferred back to the user, no taxes were paid.

HMRC director of counter avoidance, Mary Aiston, denounced the “cynically” marketed scheme. Such schemes “don’t work in the way the promoters claim and users can end up with big tax bills,” she said, adding that HMRC will “continue to take strong action against those who promote and market tax avoidance schemes and remain committed to supporting taxpayers to steer clear of or exit tax avoidance”.

According to HMRC, a newsletter was circulated by Buckingham Wealth Ltd and Minerva Services Ltd to their clients, encouraging URT users to start making replacement contributions to a newly founded scheme called the Nova Trust. The newsletter wrongly claimed that changing schemes would put an end to HMRC’s investigations.

As part of its “Don’t Get Caught Out” campaign, HMRC is reminding taxpayers that the consequences of using tax avoidance schemes can be severe, including additional taxes, interest, and penalties, as well as reputational damage.

Over the last year, HMRC has published the details of 33 tax avoidance schemes and exposed their promoters. Furthermore, it has released details of 11 Stop Notices issued to promoters, and has recently launched a consultation on criminalising the breach of them.

Launched last week (April 27), the review will also explore proposals to expedite the disqualification of directors of companies who are involved in the promotion of tax avoidance, including those who control or exercise influence over a company.

Julia Kermode, founder of IWORK, a support body for temporary workers, said the consultation could prove to be “a landmark moment” for independent working in the UK.

Currently, promoters can face penalties of up to £100,000 if they fail to comply with a Stop Notice.

But HMRC has also come under fire for its handling of tax avoidance schemes lately. On April 14, the names of two known UK tax avoidance schemes were removed from the government’s official list due to a legislative quirk preventing the names of bogus schemes being publicised for more than 12 months.

Industry experts called the move “ridiculous” and “appalling”, arguing that the government list’s original purpose, to demotivate the proliferation of tax avoidance schemes, is fundamentally compromised by the redaction of the names.