TaxWatch Executive Director, George Turner, has written to HMRC calling for those who sell disguised remuneration tax avoidance schemes to be investigated for tax fraud. We have previously written to the Economic Crime Unit of the City of London Police, calling on the department to open an investigation into sellers of these schemes for defrauding their clients.
HM Revenue & Customs is holding a consultation and has asked for views on ways to tackle future use of disguised remuneration tax avoidance. The consultation sets out an array of rules that HMRC has introduced in recent years in an attempt to restrict the ability of promoters of tax avoidance schemes to operate effectively.
However, these measures stop short of the one thing that HMRC could do to effectively shut down the sale and marketing of these schemes – the application of existing criminal law to prosecute those who design, operate, and promote dishonest tax avoidance schemes.
There is a myth that appears to have taken hold that the promoters of tax avoidance schemes have done nothing wrong, and that the promotion of a tax avoidance scheme is “not against the law”.
However, under the law, where someone is involved in the promotion or operation of a tax avoidance scheme that is dishonest, criminal proceedings can be brought against them. This was demonstrated in the case of R vs Charlton, when the Crown successfully brought a prosecution against three accountants and a barrister for their roles in the design, operation and promotion of a failed tax avoidance scheme. All of the defendants received custodial sentences.
HMRC’s characterisation of the activities of the promoters of disguised remuneration schemes, which includes “trying to hide their activities from HMRC by not complying with their legal obligations to disclose their scheme”and “ignoring or only partially answering HMRC enquiries”, clearly fit the circumstances under which HMRC should open a criminal investigation under their criminal investigations policy.
Despite this, criminal investigations have been rare, and we are unaware of any promoter being successfully prosecuted for tax fraud.
The letter also highlights the importance of criminal prosecution in order to protect the public from exploitation by dishonest promoters. Users of disguised remuneration tax avoidance schemes often end up being the victims of fraud themselves, with scheme promoters providing knowingly false and misleading information about the legality of these schemes in order to persuade people to join them. However, whilst scheme users have been actively pursued by HMRC, relatively little has been done to confront the lawyers and tax professionals who created the problem in the first place.
The full evidential submission can be found here.
Photo by George Turner