The taxpayers were self-employed dentists working through a company of which they were directors. They entered into a tax planning scheme involving an offshore remuneration trust and personal management company. They claimed contributions to the trust as expenses against their self-employed income reducing their taxable income to below the personal allowance. However although an accrual was made for the contributions neither taxpayer made any payments to the trust.
After inviting the taxpayers to make disclosures under the contractual disclosure facility but to which neither responded HMRC opened code of practice 9 fraud investigations.
HMRC concluded the expenses were not allowable. The investigating officer offered the taxpayers the opportunity to reach a contract settlement. They did not take up the offer so HMRC issued discovery assessments for each relevant year. It also imposed penalties at 50.75% of the tax due on the basis the taxpayers’ behaviour was deliberate.
The...
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