At the end of this month the consultation period for HMR&C's 'High Risk Tax Avoidance Schemes' will end; the document seems to make their intention extremely clear:
5. Payment of the tax in dispute
5.1 The objective is to remove the cash flow advantage to users of high risk avoidance schemes of retaining the tax understated until the case is settled. This will be done by providing that users of such schemes will be subject to an additional charge on amounts that are underpaid. Users will be able to protect themselves from the additional charge by paying the tax in dispute upfront (i.e. when HMRC believes it should have been paid). The additional charge will be set at a rate that will remove the cash flow advantage of not paying the tax upfront.
Payment upfront
5.2 Taxpayers are required to complete returns on the basis of their best assessment of the amount of tax they think is due. A person who uses a listed scheme might decide to submit a tax return or claim showing tax payable or repayable on the basis that the scheme delivers the tax advantage it claims to provide; i.e. a return which assumes that the scheme works.
5.3 If it is determined in due course that the scheme does not work, an additional charge would be payable, reflecting the amount underpaid and the time over which it is underpaid.
5.4 Users would be able to protect themselves from the risk of having to pay an additional charge by making a payment which they think is sufficient to cover the risk.
The additional charge
5.5 The additional charge would apply where a listed scheme user opts not to pay the tax in dispute upfront and that tax is finally confirmed as due to HMRC.
5.6 The general principle governing the additional charge is that it should offset the benefit the scheme user obtains by having the enjoyment of the tax in dispute until the dispute is resolved. In other words it should remove the cash flow advantage the user obtains from retaining possession of the tax in dispute. It should be separate from any liability to an inaccuracy penalty.
Their definition of a High Risk Scheme is: "schemes that use contrived arrangements to seek tax advantages in circumstances where they are not intended to be available"
5. Payment of the tax in dispute
5.1 The objective is to remove the cash flow advantage to users of high risk avoidance schemes of retaining the tax understated until the case is settled. This will be done by providing that users of such schemes will be subject to an additional charge on amounts that are underpaid. Users will be able to protect themselves from the additional charge by paying the tax in dispute upfront (i.e. when HMRC believes it should have been paid). The additional charge will be set at a rate that will remove the cash flow advantage of not paying the tax upfront.
Payment upfront
5.2 Taxpayers are required to complete returns on the basis of their best assessment of the amount of tax they think is due. A person who uses a listed scheme might decide to submit a tax return or claim showing tax payable or repayable on the basis that the scheme delivers the tax advantage it claims to provide; i.e. a return which assumes that the scheme works.
5.3 If it is determined in due course that the scheme does not work, an additional charge would be payable, reflecting the amount underpaid and the time over which it is underpaid.
5.4 Users would be able to protect themselves from the risk of having to pay an additional charge by making a payment which they think is sufficient to cover the risk.
The additional charge
5.5 The additional charge would apply where a listed scheme user opts not to pay the tax in dispute upfront and that tax is finally confirmed as due to HMRC.
5.6 The general principle governing the additional charge is that it should offset the benefit the scheme user obtains by having the enjoyment of the tax in dispute until the dispute is resolved. In other words it should remove the cash flow advantage the user obtains from retaining possession of the tax in dispute. It should be separate from any liability to an inaccuracy penalty.
Their definition of a High Risk Scheme is: "schemes that use contrived arrangements to seek tax advantages in circumstances where they are not intended to be available"
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