HMRC Tax Avoidance Challenges

In the year of 2016/17, there were 26 cases of tax avoidance and HMRC won 24 cases out of 26 and had one case of a mixed result. These figures are slightly down compared to the year 2015/16 where HMRC won 23 out of 26 cases.

Cases that HMRC won and lost

One of the cases that HMRC won was against Ingenious Film Partners 2 LLP and Ingenious Games LLP. The case involved the 2 LLPs arguing that as they were involved in the production of a large number of films and video games that in the early years. It lead onto trading losses which their investors could set against their other taxable income. HMRC denied that it was not a legitimate investment but a way of avoiding tax.

The three cases that HMRC lost were against Investec Asset Finance PLC over corporation tax, Project Blue Limited over stamp duty land tax and children of a man who used tax planning to mitigate his IHT bill.

A man who used tax planning to mitigate his IHT bill.

Donald Salinger was the man who used tax planning and he had entered into an arrangement involving the transfer of a reversionary interest in an Isle of Man trust to his family with 2 of his children being trustees.

After his death the children argued the reversionary interest was in face excluded property as no consideration was given for its acquisition. HMRC argued that consideration had actually been given and that Mr Salinger had made a transfer of the value of £820,000.

The judge ruled in favour of the children as although consideration was given, there wasn’t a loss to the value of Mr Salinger’s estate immediately following the transfer of that interest.

HMRC have been given confidence by other governments in recent years to properly sort out tax avoidance as well as being given extra funding and staff to clawback lost revenue.

Payment notices

More than 75,000 accelerated payment notices have been issued so far to people who are under enquiry for tax avoidance since rules were introduced back in 2014. This regime has been criticised for causing groups of investors in tax avoidance schemes to have to pay large amounts of tax with barely any time to come up with the finds to settle the liabilities.

The moral of these stories are to not enter into tax planning arrangement without advice from an experienced practitioner.  To help avoid inheritance tax contact us today to check how we can help you.