HMRC wins £40 million battle against tax avoidance promoters
29 March 2019
HMRC has won a legal case over tax avoidance scheme promoter Hyrax Resourcing Ltd which will help the tax authority collect over £40 million in unpaid taxes.
The victory over Hyrax means the promoter now has to disclose the details of their tax avoidance scheme to HMRC, along with the names and addresses of 1,180 high earners who used it.
If Hyrax fail to provide the required information to HMRC they could face a penalty of nearly £6 million, as well as £5,000 per day for not fully disclosing the scheme.
The scheme promoted by Hyrax was a disguised remuneration avoidance scheme which worked by paying scheme users in loans so they could avoid paying Income Tax and National Insurance on their earnings.
Scheme users were paid just enough to comply with the National Minimum Wage. The rest of their income was made up in loans which were transferred to an offshore trust in Jersey. The amounts received under loan agreements were not declared as income on the scheme users tax return, meaning they didn’t pay tax on all their earnings.
The First-tier Tribunal agreed with HMRC that Hyrax Resourcing Ltd had not complied with the Disclosure of Tax Avoidance Schemes (DOTAS) rules, which requires promoters to tell HMRC about the schemes they sell.
The First-Tier Tribunal decision can be read online.