In my previous article I mentioned DOTAS Spotlights and how you should have at least a basic understanding of their content. There are currently twelve Spotlight items relating to income tax and NI and a further two concerning VAT. It is important to remember however, that this is merely a publication of their view and not law. It is worth reading as the views expressed are interesting to say the least. They particularly emphasise that the schemes featured within Spotlights are those which they consider have the “widest implications”, which probably means those that are widely adopted and result in a greater loss of revenue to the exchequer. Conversely, they go on to state that “HMRC will not include schemes aimed at very specialised areas, with a limited scope or where HMRC estimate not much tax loss is involved”. It goes on to say that if you are in doubt you should consult a reputable tax adviser!

Certainly, HMRC can and will challenge schemes through the courts where they think it appropriate. They also suggest that taxpayers have “conceded” that the avoidance doesn’t work and have declined to continue with the litigation. However, when questioned about this the office concerned was unable to confirm whether this was as a result of a settlement agreement or on which occasions HMRC conceded the point.

We would also mention that HMRC have recently declared that the decision to use a tax avoidance scheme in respect of directors is a risk factor. They consider that a new company controlled by the directors is also a risk factor where there have been loan account irregularities. Either one of these may be enough for a company to be considered “not low risk” and may lead to a compliance check. But, is this really news to u? I suppose that the only thing new in this statement is that there is now only one criterion adopted by HMRC; “not low risk”! So, it appears that almost every company is vulnerable to a compliance check.

In conclusion, how does AVN assist in reducing risk? Well, principally in the adoption of our due diligence procedure. It must be emphasised however, that this can only be a snap-shot in time as circumstances change. Our providers are the same as any other business supplier and can and will make commercial decisions in their own best interest which we have no control over. On occasion these decisions will be commercially sensitive and they are not legally or morally obliged to consult AVN for our opinion or permission. Consequently, we regard the due diligence process as on ongoing exercise that requires continual investigation and we have therefore recruited an additional team member, Anne Cook, whose primary responsibility is the review of all due diligence undertaken to date. Thereafter, we aim to repeat the process at regular intervals.

We endeavour to reduce risk, but will never be able to eliminate it completely. Further, we are not a substitute for your own experience and expertise. However, you must not lose sight of the fact that you are not seeking to sell your client anything or encourage them to adopt the strategies on offer. Rather, you are advising your client such planning is available if they are of a mind to use it and if undertaken correctly remains lawful and will not result in a penalty even if it is ultimately successfully challenged by HMRC.

If you’re not already an AVN Tax member find out how you can keep up-to-date with the latest tax planning opportunities by calling 0844 414 3194.