- Down from a high of 2,860 businesses just four years ago
- ‘Death of the tax scheme’ as HMRC crackdowns pay off
- HMRC still adding to their weaponry against tax avoidance
Just 330 businesses informed HMRC they were using Corporation Tax planning schemes last year, down 42% in a year and 88% from a peak of 2,860 just four years ago, our research shows.
The statistics show that a series of Government crackdowns over recent years have virtually eradicated aggressive Corporation Tax planning.
The powers HMRC have gained in recent times to tackle tax avoidance include:
- controversial Accelerated Payment Notices (APNs), which allow HMRC to demand payment of tax within 30 days, with no right of appeal, if a business has used a tax planning scheme that falls under its Disclosure of Tax Avoidance Schemes (DOTAS) regulations;
- new criminal penalties for ‘Enablers of Tax Avoidance’, targeting tax advisers and accountants whose clients use tax schemes; and
- the General Anti-Abuse Rule (GAAR), which is often used to ‘sweep up’ tax planning which is not subject to a specific regulation.
The fall in use of Corporation Tax planning schemes calls into question the need for HMRC to continue to expand its powers, when so little aggressive tax planning is now taking place.
Clive Gawthorpe, tax partner in our Manchester office, says: “The Corporation Tax planning scheme is now virtually dead – HMRC can legitimately claim to have won the war on aggressive tax planning by businesses.”
“Once-commonplace schemes like Employee Benefit Trusts have now almost completely died out, with only a very small number remaining. Many of those businesses are likely to be in the process of settling or litigating with HMRC over them.”
“Even though the war is won, HMRC continue to add to their weaponry. These figures really raise the question of why that is necessary.”
Corporation Tax schemes that have still been used in recent times include:
- a scheme in which a business owner uses assets of the business to make a spread bet on the movements of the stock market, later taking the winnings tax-free. This was defeated by HMRC at the first-tier tax tribunal; and
- The Employer Funded Retirement Benefit Scheme (EFRBS), in which an employer pays into a discretionary trust for an employee’s retirement at much lower tax rates. The GAAR Panel has ruled that these arrangements are not reasonable.
Death of Corporation Tax planning: Number of businesses admitting to using Corporation Tax schemes falls 88% in just four years