HMRC 3 - Tax avoiders 0

Users of three tax avoidance schemes have lost their appeals. The decisions by the Upper Tribunal are the latest in HMRC’s ongoing battle against tax avoidance.

One of the appeals related to a scheme involving the sale of shares to investors for significantly more than they were worth. The shares were subsequently sold at a substantial paper loss to the investor, at no risk, who sought to offset the loss against their income tax liability.

The other two appeals involved schemes created by investment banks. The intention was to convert profits that would have incurred income tax into capital gains, to make use of a capital gains tax exemption.

All three appeals were dismissed by the Upper Tribunal, following previous hearings at the First Tier Tribunal. HMRC has estimated that tax in excess of £260 million has been protected.

The tax authority takes a robust approach where a taxpayer has invested in what HMRC regard as a tax avoidance scheme. Cases can take many years to reach an outcome, which tends to place an emotional strain on the taxpayer. The introduction of Advanced Payment Notices last year further increased the pressure on investors.

Taxpayers who have made similar investments may be able to settle their position without recourse to the courts. Much will depend on the nature of the arrangement entered into, and specialist advice should be taken.

Phil Berwick is a Consultant at Berwick Law. He can be contacted on 07956 492026, or via email at phil.berwick@berwick-law.com.