HMRC scoops extra £1bn through tax loophole crackdown
HMRC has scooped an additional £0.9bn over the last year, as its crackdown on tax avoidance schemes has reaped rewards
Increased scrutiny of tax avoidance schemes brought in £2.7bn of extra tax receipts for HMRC in 2018/19 – up 46% from £1.8bn in 2017/18 — including the revenue gained from investigating disguised remuneration schemes – according to accountancy group UHY Hacker Young.
Tax avoidance schemes under investigation include film partnerships by some high net worth individuals, who invested in films to reduce their tax burden.
HMRC has now banned favourable rates on film investments. Ingenious Media, a company previously used by celebrities such as Guy Ritchie, David Beckham and Robbie Williams to fund films, is currently appealing against the decision.
As UHY Hacker Young reported, an estimated 2,000 people invested in the three largest limited liability partnerships schemes, avoiding billions in tax.
Mike Crellin, director of UHY Hacker Young, said, “HMRC’s focus on eliminating the use of tax avoidance schemes is delivering impressive results.
“Fewer schemes are being launched and HMRC is sweeping up more of the taxpayers who have bought into these schemes.”
However, the Revenue is itself under scrutiny for its loan charge. The charge has brought in a significant proportion of HMRC’s high tax yield for the year, but has prompted accusations of a “draconian” approach.
“The loan charge deadline led to a bumper year for HMRC, but a lot of that money was squeezed out of taxpayers who never realised they were buying into a tax avoidance scheme,” Crellin noted.
“Many of those taxpayers had to sell their assets to pay those crippling tax bills. Nobody can fault HMRC’s targeting of tax avoidance, but many of its methods are causing some alarm.”
An HMRC spokesperson said, "Tax avoidance doesn’t pay. Most avoidance schemes simply don’t work and can give rise to unintended tax consequences. People can end up paying much more than they were trying to avoid in the first place. If something looks too good to be true, then it almost certainly is.”
Originally published in Economia on 27 August 2019.