Artificial Tax Avoidance Scheme Closed By HMRC
Author: KinsellaTax UK Ltd.
The Court of Appeal rejected a taxpayer's appeal against HMRC action, for his involvement in an artificial tax avoidance scheme that saw him try to avoid an estimated £11m in tax. According to HMRC the tax avoidance scheme "was an artificial, circular, self-cancelling scheme designed with no purpose other than to avoid tax".
The tax avoidance scheme in question was marketed by the major accountancy firm, PriceWaterhouseCoopers (PwC), The Telegraph has confirmed.
Following the outcome of the tax avoidance case, a spokesperson for PwC, said:
"We aim to provide balanced, informed advice which takes into account not only current tax legislation but also current practice and case law. The case reported today relates to tax planning undertaken some years ago and planning of this nature is no longer recommended to our clients."
The Telegraph also reported that the government ‘could gain billion of pounds in tax revenues' after the Appeal Court released judgement that the tax avoidance scheme is ‘invalid'.
Experts have estimated that the total cost of lost tax from all 200 people involved in the tax avoidance scheme will be around £100m.However; the Appeal Court decision, according to Richard Evans, reporting in the Telegraph, is said to have set a "precedent that could mean billions of pounds potentially avoided tax will instead flow to the public purse".
"To my mind, this appeal was a thinly disguised attempt to undermine the Ramsay principle. Once it was accepted that the principle remains valid, and once the findings of the First Tier Tax Tribunal were accepted, this appeal was doomed to fail," said Lady Justice Hallet, one of the Appeal Court Judges.
Losing the case to HMRC at the Appeal Court was businessman, Howard Scholfield, who was sold the tax avoidance scheme by PriceWaterhouseCoopers accountants, in order to avoid payments of capital gains tax on £10.7m. The tax avoidance scheme, now ruled as ‘invalid, involved a series of complex transactions that went round in a circle with the effect of avoiding capital gains tax due.
Exchequer Secretary to the Treasury, David Guake, commented on HMRC's tax avoidance victory:
"This is a great result for the country and it's another example of HMRC taking firm action against the avoidance schemes that would otherwise deprive the UK of billions of pounds. HMRC has a strong track record of quickly and effectively challenging avoidance through the courts, and anyone thinking of using such a scheme needs to carefully consider that.
"When millions of hard working families are playing by the rules, paying what they have to, we will not put up with the use of cleverly structured schemes designed purely to get around the rules. I hope that real lessons are learnt from the Court of Appeal's decision."
A milestone victory for the taxman, it seems a standard has now been set in court that sends out the message that ‘artificial' and ‘aggressive' tax avoidance arrangements will no longer be tolerated.
Kevin Kinsella, of Kinsella Tax Investigations, said:
"This is a problem for people seeking to use these arrangements, which are not cheap. If it goes against you then you become liable for the tax. There may be penalties and certainly interest, and of course the cost of going into the scheme in the first place. It could be disturbing and focus HMRC on your tax affairs, which may cost you considerable fees to deal with. It's not the sort of thing you want on a Monday morning."
Article Source: http://www.articlesbase.com/taxes-articles/artificial-tax-avoidance-scheme-closed-by-hmrc-6091250.html
About the AuthorKinsellaTax UK Ltd offer a tax investigation service to individual taxpayers and businesses under tax investigation by HMRC. We can also act on behalf of lawyers and accountants, helping with their client's tax investigations.
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