Ad watchdog rips up income trust's adverts

An income trust scheme claiming contractors and other users could pay up to 80% less tax “without breaking the law” has been pounced on by the advertising standards watchdog.

Ruling against the scheme by Knight Wolffe, the Advertising Standards Authority said claims in the firm’s adverts promoting it were “misleading” and lacked substantiation.

HM Revenue & Customs, which complained about the ads on four grounds, believes the ASA’s decision “sets a precedent so other avoidance sellers must not make the same claims”.

Those claims were that; the scheme was “known and accepted by HMRC”; it was “approved by the House of Lords”, and that it involved “no tax avoidance”.

A fourth claim that Knight Wolffe made -- crucially, alongside HMRC’s logo so seeming to imply the Revenue’s endorsement, was that the scheme “remains effective”.

In its defence to the ASA, the firm cited Macdonald V Dextra to justify its House of Lords claim. It also said the HMRC logo was not used in its promo to imply HMRC’s endorsement.

And it argued that ‘no avoidance’ was fair to assert on the basis the firm advised clients that the structure used was “always declared to HMRC” within their tax returns.

But the ASA was entirely unconvinced. The regulator further backed HMRC by agreeing that the firm’s failure to outline the so-called ‘2019 charge’ for Disguised Remuneration users was “misleading by omission.”

“We noted that Knight Wolffe had not commented on or explained why DR, the proposed loan charge and/or GAAR were not relevant considerations of which businesses should be aware before deciding whether to seek more information about the scheme or enter into it”, the ASA said in its ruling.

Also a provider of an IR35 “solution,” Knight Wolffe has been reminded by HMRC that they must now remove the defeated claims from their ads, and that the ads must not appear again in their current form.

But there does not appear to be any mention of the ASA’s ruling on the firm’s website, which tells visitors: “Our approach is based on honesty as all structures are declared and we only suggest solutions that we believe in”.

Editor’s NoteRelated –

HMRC’s latest moves: decoded for IT contractors

Contractors’ Questions: Can I get 90% take-home pay via an accountant?

Contractors, don’t be fooled by imposter umbrella companies

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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