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Number of UK tax planning schemes drops to record low

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Fewer tax planning schemes were reported to HM Revenue & Customs (HMRC) in the year to September 2013 than in any of the past 10 years.

Research conducted by Pinsent Masonsshows that this year has seen fewer schemes reported than in any year since mandatory disclosure was introduced in 2004.

The 2004 Disclosure of Tax Avoidance Schemes (DOTAS) legislation was introduced to help HMRC identify new tax avoidance schemes and judge whether to amend the law accordingly.

“The figures show that HMRC is taking a tougher stance on tax avoidance and winning the battle, if not the war, to eliminate elaborate tax schemes,” said Jason Collins, head of tax at Pinsent Masons. “They have been successful in dissuading the bigger accountancy firms from creating new tax avoidance schemes with many major professional services firms now avoiding the more extreme forms of tax planning as it carries with it a reputational risk.”

“Companies and high-earning taxpayers may still look for new ways to minimise their tax bill but the fact that there were just a fraction of new schemes last year compared to previous years suggests HMRC is doing a better job at using its understanding of existing avoidance schemes to police the promoters and close loopholes in the law – often before they can be fully exploited,” added Collins.

Collins said the government should now consider an amnesty for existing schemes.

“HMRC is getting better at using the stick, but it could recover more of what it considers to be the UK’s missing taxes by making more use of the carrot,” said Collins.

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