HMRC has teamed up with the Advertising Standards Authority (ASA) to crack down on misleading marketing of tax avoidance schemes, as its research shows the number of promotors has halved in the past six years
The joint enforcement notice aims to disrupt the activity of promoters and protect people from being presented with misleading adverts which may tempt them into tax avoidance.
It is specific to misleading advertising of disguised remuneration and stamp duty land tax arrangements, although the principles set out in the notice may apply to other types of tax avoidance.
It requires promoters to be clear about the potential consequences of tax avoidance in any online adverts.
Immediate sanctions include having their paid advertising removed from search engines and follow-up compliance action, which can include referral to Trading Standards.
The move is part of an HMRC awareness campaign, ‘tax avoidance: don’t get caught out’, which aims to warn and educate contractors about how to identify if they are being offered a tax avoidance scheme, and the pitfalls of using these schemes.
It follows publication of HMRC on the size and nature of the tax avoidance market. This shows that over the last six years, the amount of tax the UK loses to avoidance has fallen by around a half.
Around 20 promoters, many of whom were active in promoting disguised remuneration schemes, have moved out of promoting altogether over the period, leaving about 20 to 30 promoters who are behind most of the tax avoidance schemes that are marketed to the UK public.
HMRC data indicates that promoters are almost never members of the professional accountancy bodies. Whereas previously promoters may have been tax agents who would advise their clients on other tax issues, today they are more likely to specialise in avoidance and nothing else. Many promoters are based offshore and will move jurisdictions as HMRC closes in on their operations.
The market has moved away from top accountancy firms and banks selling schemes, to boutique promoters selling online.
This has led to a disappearance of investment-based avoidance schemes involving Hollywood films or gold bullion. Instead the market has decisively shifted towards employment-based avoidance schemes, aimed at those with middle income levels, including contractors and agency workers.
HMRC estimates about 30,000 individuals and 2,000 employers were involved in avoidance schemes in 2018 to 2019. This compares with about 22,000 individuals and 6,000 employers during 2013 to 2014.
HMRC is doing more work to understand why the number of individuals identified as being involved in avoidance schemes has increased while the number of employers involved has decreased.
Tax avoidance in the UK is concentrated in London and the south-east of England, but the research found a significant shift away from the London postcodes more usually associated with those on higher incomes, including the City of London and Knightsbridge, towards the outer boroughs and commuter belt.
There are noticeable concentrations in Barking and Dagenham, Thurrock, Greenwich and Croydon.
HMRC’s report suggested there is ‘a hard core of serial tax avoiders who are actively seeking to reduce the amount of tax they pay’. Around 12% of individuals identified as being involved in avoidance schemes in 2018 to 2019 had been in schemes for more than three years.
However, the tax authority says research suggests the majority of people who used avoidance schemes, particularly in recent years, did not look too deeply into the tax arrangements they were being offered. In part, it suggests, this may simply be because they believed they had handed their affairs to someone they viewed as competent and professional.
The report stated: ‘Few understood that tax advice is unregulated, and many were surprised to find they were personally responsible for ensuring they pay the right tax.’
HMRC said promoters use advertising that sounds convincing and that easily draws in clients. Schemes are marketed online through price comparison-style websites, with claims such as ‘up to 90% retention on contract income’ or ‘unprecedented support with HMRC’.
During the summer, HMRC consulted on a number of new measures to increase its powers to tackle promotors, and the Treasury’s release of tax policy documents in November included a further package of measures to tackle promoters, which it will consult on in spring 2021.
Under these proposals onshore partners will be held equally responsible for the anti-avoidance regime penalties that the offshore promoter generates.
There will be financial consequences for promotors who continue to promote tax avoidance schemes while under investigation by HMRC, and HMRC will have additional powers to act against companies that continue to promote schemes and who sidestep the rules designed to restrict their activities. The proposals would see such promoters shut down and restricted from setting up similar businesses.
ASA enforcement notice is here: https://www.asa.org.uk/resource/enforcement-notice-tax-avoidance.html.
Use of marketed tax avoidance schemes in the UK: https://www.gov.uk/government/publications/use-of-marketed-tax-avoidance-schemes-in-the-uk/use-of-marketed-tax-avoidance-schemes-in-the-uk.
Tax avoidance- don’t get caught out campaign is here: https://taxavoidanceexplained.campaign.gov.uk/?utm_source=govuk_press&utm_medium=refferal&utm_campaign=upstream_.