The operators of tax avoidance schemes are “running rings” around HMRC to promote avoidance schemes that are “completely and utterly immoral.”
That’s the verdict of Public Accounts Committee chair, Margaret Hodge. Never one to mince her words, Ms Hodge was on characteristic form during the PAC’s recent round of questioning, when tax advisers and avoidance operators were in the hot seat.
Drilled by Committee members, one director of a tax avoidance scheme company (Aiden James of Tax Trade Advisors) admitted that firms like his exploit loopholes in the UK’s complex tax law system to secure maximum tax advantages for their clients. All his firm’s “loophole” schemes were legal at the time of implementation, he said, but all are also shut down if HMRC investigations subsequently find them illegal.
The Disclosure of Tax Avoidance Schemes law (DOTAS) makes it obligatory to report new avoidance schemes to the Revenue. But HMRC doesn’t at that stage rule against them. It merely issues a number declaring that it’s aware of them, creating an opportunity for dubious schemes to go on running until finally declared unlawful.
Since 2004, DOTAS has led to 93 alterations in tax law, but hundreds of new schemes are known to arise every year. Advisers simply adapt to new laws, close down old schemes and find new loopholes.
But with an unprecedented clampdown on tax avoidance schemes announced in the Chancellor’s Autumn Statement, the climate is definitely changing, as the government looks to pursue all members of the economic spectrum who are indulging in tax avoidance.
There’s probably never been a more apt time for the UK’s contracting community to consider signing up as PAYE Umbrella Company Employees. Tax avoidance just got a whole lot riskier.