One of the conversations you are likely to have had with your accountant is around your approach to tax strategy and mitigating liabilities. Those that pay significant tax, including high earning business owners along with celebrities and sports people, are likely to make use of various structures and schemes. However not all schemes are equal in the eyes of HMRC. By participating in a scheme (known by its name and scheme reference number) you may well have committed tax avoidance which is not a legal activity.
Anyone who participated in the schemes recently published in full by HMRC, some 33000 individuals, are likely to be asked to pay the tax back as an “accelerated” payment. This is thanks to new powers HMRC will have from this month. Individuals will only be given 90 days to pay.
Of course, most people use schemes that are pre-approved by HMRC and therefore don’t come into difficulties. Problems arise when individuals use schemes that aren’t pre-approved or flout new changes to the tax regime. Long term membership of schemes, perhaps going back 10 or more years, may result in very significant amounts of tax owed.
Whether you participate in aggressive tax planning or not, the risks should be managed in a way that means you can cover any problems financially. Even where tax planning is wholly legal it can significantly damage reputation. The public expect businesses to pay a fair amount of tax.
With the list of schemes published recently, tax experts are suggesting businesses and individuals will have to sell assets or raise external finance. Some say bankruptcies and cash flow problems will result.
The implications for your own tax planning? Make sure you’re in full control of your personal and corporate tax planning. Always ask for the full facts when assessing new schemes to ensure you’re comfortable with their risk profile.