Decline in 'off the shelf' tax avoidance schemes

The taxman could face a rise in the number of individuals prepared to enter into bespoke tax avoidance schemes amid signs he is winning his war against their ‘off the shelf’ counterparts, an accountant says.

In fact, fresh figures from HM Revenue & Customs concerning its Disclosure of Tax Avoidance Schemes indicate “some measure of success” for the department, said Top 20 accountancy firm Saffery Champess.

According to the firm, the DOTAS figures suggest that the number of declared tax avoidance schemes in the UK has continued to fall in the six months to September this year to a very low number.

In particular, and for that period, only 30 schemes were registered under DOTAS, compared with 89 in the 2012-13 tax year; 151 in 2011-13, and looking further back, 607 in 2005-6.

Reflecting on the data, Ronnie Ludwig, partner at Saffery’s private wealth unit, said the decrease in such schemes represented a significant trend in HMRC’s battle against tax avoidance.

But he believes that while there has been a long-term decline in registrants with DOTAS, under which providers are required to inform HMRC of their arrangements, there may also be a “growing turn towards bespoke tax planning measures.”

“The campaign against so-called off the shelf schemes is apparently working, and that those who have engaged in taking up the schemes, as well as those promoting them, are now backing off from new schemes as the previous ones are being successfully challenged by HMRC,” added Mr Ludwig.

“Expensive litigation costs associated with trying to defend schemes will also be a major factor. [But] the success of DOTAS is likely to provoke a return to more bespoke tax mitigation planning, although advisors will be very aware of the General Anti-Abuse Rule which HMRC now has in its arsenal if mitigation planning is deemed to be abusive.”

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