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HMRC Spotlights Tax Schemes

Sunday, December 19, 2010

HM Revenue and Customs (HMRC) has warned taxpayers seeking tax planning solutions of the legal risks associated with employing tax avoidance schemes that may fall foul of UK tax law.

In particular, in HMRC’s latest Spotlights consumer protection publication, the taxman has warned that the issue by HMRC of a scheme revenue number (SRN) does not indicate that the tax authority has approved the scheme.

Its publication states: “The issue of a SRN does not mean either that HMRC ‘approves’ the scheme or that HMRC accepts that the scheme achieves its intended tax advantage." HMRC added that even schemes that it deems to be a high risk to the taxpayer receive SRNs, and urged taxpayers that tax planning sites claiming to offer 'HMRC approved' solutions were misleading their customers.

HMRC further detailed indicators that it uses in deciding whether to further investigate a tax avoidance scheme, and warned taxpayers to be vigilant in certain cases, namely where:

  • Artificial or contrived arrangements are involved.
  • The scheme seems very complex given what the taxpayer aims to achieve.
  • There are guaranteed returns offered with apparently no risk.
  • There are secrecy or confidentiality agreements.
  • Upfront fees are payable or the arrangement is on a no win/no fee basis.
  • The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided.
  • The scheme is said to be approved by HMRC (it does not follow that this is true).
  • Taxation of income is delayed or tax deductions accelerated.
  • Tax benefits are disproportionate to the commercial activity.
  • Offshore companies or trusts are involved for no sound commercial reason.
  • A tax haven or banking secrecy country is involved without any sound commercial reason.
  • Tax exempt entities, such as pension funds, are involved inappropriately.
  • The scheme contains exit arrangements designed to sidestep tax consequences.
  • The scheme involves money going in a circle back to where it started.
  • Low risk loans to be paid off by future earnings are involved.
  • The scheme promoter lends the funding needed.
  • There is a requirement to take out insurance against the failure of the tax planning to deliver the tax benefits.

HMRC's publication advises that if taxpayers have doubts about a scheme they should check with a reputable tax adviser.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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