HMRC has historically taken a rigid approach to settling tax avoidance arrangements where they believed the planning did not work or the planning had been successfully challenged in the tax courts.
HMRC would invariably require investors to enter into a settlement for the full amount of tax and accrued interest. This proved insurmountable for many investors. HMRC was willing, within certain parameters, to allow for the amounts owed to be paid off over a period of time, but such arrangements tended to be limited in terms of their time frames and flexibility.
There has been a recent change in approach by HMRC. We are in contact with senior personnel in HMRC’s Counter Avoidance Directorate, who have advised us that HMRC now recognises that many investors avoid entering into a dialogue with HMRC about the settlement of their tax avoidance arrangements. This is because they believe it is unlikely they would ever be able to meet the full tax and interest liability, even if it were spread out over a period of time under a payment arrangement acceptable to HMRC. To address this issue, HMRC is taking a fresh view. As a way of encouraging investors to come forward, HMRC is willing to discuss means-based settlements.
A new team within HMRC is handling cases under this new approach, led by experienced senior investigators. We have already had several clients accepted into the team, and we are discussing settlement under the new approach. We believe there is now a significant opportunity for investors in various tax avoidance arrangements to negotiate a settlement with HMRC. This settlement may involve the payment of less than they strictly owe.