In accordance with the Finance Act 2014, HMRC has launched an extensive crack down on tax avoidance. Around 33,000 people in the UK could receive a letter from the government department by 2016 that demands the payment of tax, and the average bill issued is believed to be around £155,000.

HMRC is aiming to collect £5.1bn through the drive by the end of the 2016 tax year.

The first accelerated payment notices were issued in August, and the organisation plans to issue a further 2,500 notices each month until it has sent out 43,000 in total – 10,000 to businesses and 33,000 to individuals. According to the financial secretary to the Treasury, David Gauke:

“The Government and HMRC have taken significant action to tackle tax avoidance and discourage people from entering into expensive avoidance schemes which, in most cases, don’t work.”

Gauke added that the accelerated payment notices would tackle those who actively seek to avoid the payment of tax. If a taxpayer signs up to an avoidance scheme that HMRC has discovered under the rules for tax avoidance scheme disclosure, they may be contacted. Once an accelerated payment notice has been received, the taxpayer is required to pay the amount due within 90 days.

In addition to the accelerated payment notices, there will also be follower notices issued, which mean that once HMRC has decided the official ruling of a case, taxpayers can no longer avoid paying the due amount. If they continue to argue their case, they may be faced with a penalty charge.

What is DOTAS?

It’s worth understanding that promoters of tax avoidance schemes are required to provide information to HMRC about specified schemes, including details of those signed up to them. Taxpayers registered with a scheme must themselves notify HMRC of the fact, often using a Scheme Reference Number, which they should include on their tax return. This is called the Disclosure of Tax Avoidance Schemes (DOTAS). Very often, HMRC can change the law so that the loopholes enabling avoidance can be closed.

Should you invest in an avoidance scheme?

Don’t be fooled, because a common misconception is that the invitation to disclose a tax avoidance scheme means that HMRC has approved it. This is completely untrue! What’s more, the government body has taken radical steps to tackle the problem of tax avoidance.

What about planning?

A professional adviser will help a taxpayer to legitimately plan their taxes throughout the year, minimising the duty to be paid at the year end. However, if a scheme seems to be too good to be true, it probably is, and should be considered carefully before you go ahead and sign on the dotted line.

Advice should be sought before taking part in any schemes to avoid becoming one of the 43,000 taxpayers who receive an accelerated payment notice. If you’re at all unsure, comment here or get in touch with one of our experts.

At The Accountancy Partnership, we’re here to clear up any uncertainties you may have regarding the various schemes available.

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About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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