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Effectiveness of HMRC’s spotlight warnings.
The publication of HMRC’s Spotlight 63, on property business arrangements involving hybrid partnerships (tinyurl.com/hmrcspotlight63), set me thinking about the role of spotlights. They have been going for more than 12 years (the first was published in 2010) and, looking back over some of the old ones, I was struck by how many of the schemes highlighted have been successfully litigated by HMRC.
However, it is worth asking whether these warnings have had any effect on taxpayer behaviour. Judging by the large number of providers still offering disguised remuneration schemes (tinyurl.com/hmrcavschlist) it seems that they may not have had a huge impact. Of course, unless somebody knows about them they won’t be effective.
HMRC has made good progress in providing information about the potential risks of avoidance schemes and there is now a prominent warning notice on the front page of its website ‘Tax avoidance – don’t get caught out’ (tinyurl.com/hmrcavoidancewarning). I did a spot check against a number of overseas tax authorities’ sites: none of them gave warnings such prominence. But this all supposes that people will go to the HMRC site to look for warnings: I doubt that many will.
Perhaps their real value is in supporting advisers who want to warn clients about schemes. There’s always a risk that clients will say to their adviser ‘you are only telling me not to do this scheme because you didn’t think about it first’.
Having a written warning from HMRC to put in front of a client makes the job a little easier.
If you do one thing...
See HMRC’s new Avoidance Handling Process Manual (tinyurl.com/hmrcahpmanual).
