Getting to the root of tax avoidance
16 October 2017
HMRC has won a landmark case against a tax avoidance scheme promoter that could lead to the recovery of £110 million.
The victory over scheme promoter, Root2, came after they failed to report a mass-marketed tax avoidance scheme, known as Alchemy, to the tax authority. The scheme aimed to extract profits from owner-managed companies in the form of winnings from betting on the stock market, which the scheme aimed to ensure would be tax free, rather than in the form of taxable employment income.
HMRC brought the case against Root2 under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, which requires promoters to tell HMRC about tax avoidance schemes they design and sell.
The First-tier Tribunal agreed with HMRC that the promoter did not abide by the DOTAS rules.
HMRC does not approve tax avoidance schemes. Under DOTAS, promoters must notify HMRC of schemes that contain various hallmarks of tax avoidance. If a scheme has been notified under DOTAS, it does not in any way signify that it has been approved by HMRC.
HMRC regularly investigates tax avoidance schemes and where it finds rules have been broken, will always take action.
DOTAS guidance can be found here.