HMRC regard a TAS that ‘distorts the tax system’ as being abusive and the purpose of the regulations is to enable them to respond quickly in order to block loopholes in the tax law. Where HMRC are advised of a TAS, they can attack it, if they think it involves an incorrect interpretation of tax law, or they can take measures to close it down by new legislation.
Since 1 August 2006, TASs have had to be notified to HMRC shortly after they have been implemented. A TAS must be disclosed when:
- it will, or might be expected to, enable any person to obtain a tax advantage;
- that tax advantage is, or might be expected to be, the main benefit or one of the main benefits of the arrangement; and
- it is a tax arrangement that falls within any description (‘hallmarks’) prescribed in the relevant regulations.
The hallmarks referred to are various, but the main ones are:
- it is kept confidential from other promoters of tax advisory services;
- it is kept confidential from HMRC;
- it is marketed with a premium fee; or
- it is a scheme involving manipulation of losses or loss schemes.
If one or more of the above criteria are satisfied, then the scheme is a TAS and must be disclosed. Similar rules apply where the scheme is an ‘in-house’ avoidance scheme.
Once HMRC have been advised of the scheme, they will issue an eight-digit scheme reference number which must be supplied to users of the scheme and which they, in turn, must include in a return to HMRC.
HMRC have published a new guidance note on such schemes which can be downloaded from their website at www.hmrc.gov.uk
HMRC have undertaken a number of measures designed to enable them to obtain more information on offshore account holdings and to improve their recovery of tax wrongly unpaid. At the time of writing, HMRC are seeking to obtain details of UK resident holders of foreign accounts from all banks which have a physical presence in the UK.
