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Limited Companies Latest To Face Warnings from HMRC

The new tougher, rougher HMRC has now turned its attention towards Limited Companies after seemingly having obsessed solely about Umbrella Companies for the last couple of years. According to HMRC Limited Companies are the next important target in their battle against tax avoidance and will be facing much harder and much more strict investigations from this point onwards. According to details released on their website relating to a whole new range of anti-avoidance initiatives and proposals (Tempted by Tax Avoidance), from this point on the taxman will be viewing the tax liability of any limited company directors as anything but limited, should they have engaged in any kind of avoidance of tax:


“If you are a director of a limited company and you are considering involving the company in an avoidance scheme you must remember that you owe legal duties to the company and its employees, customers and creditors ... This means that you could be personally liable for the company’s tax or other debts if the company engages in risky tax avoidance which causes loss to the company.”

HMRC offers some common sense advice on spotting schemes that might get directors in trouble - everything from ‘HMRC will never approve any tax avoidance schemes’ to ‘never fall for the sales pitch’ to the most obvious ‘if it sounds too good to be true, it probably is.’ It has also made clear that it wants to hear from companies or people who have been approached by risky schemes and their promoters and listen to advice about how to put in place anti-avoidance measures such as penalties for use of these schemes. Specifically HMRC is looking to explore which safeguards set up to ensure that taxpayers who have taken part in these avoidance schemes and which have been defeated through the litigation of another party will then amend their tax return or face new penalties. Currently the consultation on this proposal believes that such an option would necessitate some changes to the time limit on returns being amended but such changes would be specifically restricted to amendments within the auspices of the proposals.

This proposal is just one of many anti-avoidance measures being mooted currently. Others include a selection of obligations to be imposed on anyone setting up and promoting high risk schemes which will lead to those promoters being named and shamed to the financial community and to the public at large, with the aim of isolating them from the current mainstream of industry tax advisors. This would mean that they would be required to answer data requests about their earlier products as well as letting their clients and intermediaries know about the state of the taxman’s interest in their current scheme. Additionally publicity will be released about those promoters and information will be placed online at HMRC’s website detailing the potential consequences of using their schemes.

These measures are deemed to be necessary by HMRC because they are now considering these high risk schemes and their promoters to be out of step with the way society views tax and taxation and the avoidance thereof:

“We will make it significantly harder to market avoidance in the first place. That will be underscored by significant new penalties for failure to comply with the new regime and higher standards for reasonable excuse and reasonable care that will apply to attempts to sidestep it.”

From Greg Dickson -