Loan scheme should have been notified

The taxpayers dealt in a contractor loan scheme Hyrax Resourcing Trust from 2014. They had previously marketed different iterations of the scheme which were notified to HMRC under the disclosure of tax avoidance schemes (DOTAS) regime. Scheme users transferred from one arrangement to the next as new ones were introduced. The companies did not notify Hyrax under DOTAS.

HMRC made applications under FA 2004 s 314A for orders that the arrangement was notifiable. It said the taxpayers had set up companies to carry out tax planning schemes to enable their clients – owner-directors and consultants – to receive a small salary and a large interest-free loan instead of a large salary. The loans were never expected to be repaid. 

The taxpayers said the arrangements did not involve tax avoidance but were mitigation and that it was for HMRC to prove there was avoidance. The tribunal disagreed saying:...