HM Revenue & Customs (HMRC) has won a series of high profile tax avoidance cases in recent weeks that suggest schemes to pay less tax are failing to work.
The latest case involved former Radio 1 DJ and TV presenter Chris Moyles, who claimed he was a used car dealer to set off nearly £1 million of losses setting up a motor trading business against other income.
Other cases that have hit the headlines have involved former Manchester United manager Alex Ferguson and other celebrities investing in film production to generate losses to slash their taxable income.
In many cases, the only winners in these cases that go before tax tribunals are the promoters who design and sell the schemes to high-earners looking to reduce the amount of tax they pay as they collect high fees for setting up and running the schemes.
More often or not, instead of avoiding tax, the schemes defer when the tax is due as many cases limp through tax tribunals and appeals before the tax payer has to hand over the tax due, plus any interest and penalties.
Now, HMRC is changing tack and demanding the tax upfront if taxpayers tick the box on their self-assessment returns to show they have signed up to a tax avoidance scheme.
The onus then shifts to the taxpayer to show that the scheme works – and if it does, HMRC will return the tax and any interest due.
“Just because a scheme is disclosed to HMRC and receives a reference number does not indicate any kind of approval,” said an HMRC spokesman.
“All it means is we know about the scheme.
“What this disclosure does is give us advance warning about what is going on and lets us investigate how the scheme works in advance and gives us a chance to plug any gap the promoters are trying to exploit.”