It is no secret to the HMRC that contractors and freelancers have been using tax avoidance schemes to save money. Some tax avoidance schemes offer 85% take home pay. While this may seem appealing, a lot of tax avoidance schemes are highly risky and could lead to prosecution or fines. Trusted tax accountants in central London and other parts of the UK steer away from high-risk schemes. Most professional accountants would recommend working through your own limited company.
Offshore tax schemes are being investigated as far back as 1987 by the HMRC due to the BN66 tax legislation. Contractors, who avoided tax in the past via an offshore scheme, are now being targeted by the HMRC. This means contractors are liable for UK taxes. Contractors who used an offshore tax avoidance scheme in the past could face penalties and made to pay backdated tax. This applies to contractors, even if they only used an offshore tax avoidance scheme for a short period of time.
In regards to any tax scheme, it is worth nothing that if something is too good to be true, then it probably. Therefore many tax schemes hold a risk. Offshore avoidance schemes that offer over 85% take home pay are seen by the HMRC as aggressive. New HMRC technology means that the HMRC now have the resources to target tax avoiders more effectively. HMRC compliance checks are put in place to ensure tax is being paid fairly. It is unwise to underestimate the HMRC, who can force tax avoiders to pay back what they owe plus interest.
Any company or individual who sets up a tax avoidance scheme has to obtain a DOTAS, which is a disclosure of tax avoidance scheme. In recent years, the HMRC have been increasing their investigations on any schemes registered via the DOTAS system. The HMRC claim that they win a vast majority of all contractor tax avoidance cases in court.
The HMRC are cracking down on illegal tax avoidance schemes in an effort to boost the treasury. Contractors lured into tax avoidance schemes carry a high chance of a HMRC COP9 investigation. In some cases, the HMRC are using a “pay now, dispute later” approach, with some demanded to pay £30,000 within 90 days. This new HMRC power was enforced to chase those who were involved in aggressive tax avoidance schemes. This enables the HMRC to demand payments up front from those liable using APNs (Accelerated Payment Notices). Prior to this, the HMRC were forced to spend billions in court battles. These costly court cases prompted the approval of the new legislation in 2014. This legislation allows them to take a “pay now, argue later” approach to aggressive contractor tax avoidance. Reputable tax accountants in Birmingham and the surrounding areas are able to offer expert advice for contractors, enabling contractors to achieve the best possible solutions.
There are many legal ways to reduce your tax bill, however aggressive tax avoidance is becoming harder in the UK. If you require more information on tax, seek expert advice from a trusted tax accountant.
If you have received a letter from HMRC regarding tax avoidance scheme you have used in the past, please contact The Accountancy Solutions urgently for a free and no obligation advice on 01216297768 or 02070784001.