Tax Avoidance Schemes

Written evidence from HM Revenue & Customs

 

HMRC update to Public Accounts Committee: Letters to Tax Avoidance Scheme Users

 

4 December 2012

In paragraphs 3.15 and 3.16 of "Tax avoidance: tackling marketed avoidance schemes", the National Audit Office (NAO) reported that HMRC has established a pilot project to evaluat e the use of behaviour change techniques to ‘nudge’ users by writing to them to encourag e withdraw al from avoidance scheme s .

We have taken forward this work since the NAO’s review was undertaken in the following ways .

Three schemes are being used as pilots:

1. The first is a scheme using an Offshore Services Company to avoid PAYE and NIC We have sent letters to 1200 of those users, split into four groups and will assess which one creates the greatest impact in terms of changing behaviour. There were approximately 1500 users of this scheme in the year 2011/12, and the remaining population will act as a control group. Tax (PAYE, primary and secondary NICs) at risk is approximately £50m.

2. The second is a scheme to avoid Stamp Duty Land Tax on the purchase of property. We have developed draft letters to send to 2500 scheme users in December to explain that that a First Tier Tribunal in the summer found that this particular type of scheme did not work. The remaining users will receive bespoke letters. There are approximately 2600 users of this scheme with Stamp Duty Land Tax at risk of approximately £186m.

3. The third relates to schemes involving property business loss relief. The Government announced on 13 March 2012 that it had acted to close down Property Business Loss Relief schemes. There are approximately 200 people who we have identified have joined the partnership involved in the scheme, and we intend to send letters to all these users.

Please find attached an example of the type of letters being sent. They have been designed using behavioural insight techniques to encourag e users to withdraw from avoidance schemes.

					Specialist Investigations
					Phone
					Mon - Fri 8:00 to 16:00
					Fax
					Web	hmrc.gov.uk
	Date
	Avoidance ref number

Dear

You need to contact us now on XXXXX XXXXXX about your tax affairs

We are targeting users of aggressive Tax Avoidance schemes. We have identified you as a user of a Disclosed Tax Avoidance Scheme

Our Specialist Investigations Unit will be carrying out a full investigation into this scheme and they will open an enquiry into your tax affairs. If we find that the scheme does not work as intended, then you may have to pay the full amount of any additional tax and National Insurance contributions due, plus interest for any tax that is late.

Paying your taxes in full is the right thing to do. Not paying tax reduces our public finances. We all lose out on essential public services such as roads, the NHS and schools.

HMRC has to make sure that everyone pays the right amount of tax. We do not want people who pay the right amount to lose out because of those who do not.

What you can do

Please call us now on XXXXX XXXXXX to discuss your involvement in this scheme. We can deal more quickly with our enquiry into your tax affairs if you call us.

To stop us from charging you interest on amounts you may have to pay later, you can make a payment on account or purchase a certificate of tax deposit. More details are at www.hmrc.gov.uk/payinghmrc

You should be aware that in certain circumstances we may charge scheme users a penalty. If you do not contact us then we may view this as a lack of cooperation, which would affect the size of any penalty.

If you have any other questions, call us on XXXXX XXXXXX. Or you can write to the above address. Please quote your unique Avoidance Reference Number in all correspondence.

You may wish to discuss this letter with your advisor.

Yours sincerely

Investigator

Lin Homer

Chief Executive & Permanent Secretary

4 December 2012