Sellers of disguised remuneration tax avoidance schemes must be prosecuted, says TaxWatch
Disguised remuneration schemes are a form of tax avoidance where payments arising from employment are made in some form other than cash or to a person who is not the employee.
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Hide AdAccording to TaxWatch, these payments are not declared as income in the tax returns of the employee or contractor.
TaxWatch Executive Director, George Turner, has written to HMRC calling for those who sell disguised remuneration tax avoidance schemes to be investigated for tax fraud.
The organisation has previously written to the Economic Crime Unit of the City of London Police, calling on the department to open an investigation into sellers of these schemes for defrauding their clients.
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Hide AdHM Revenue & Customs is holding a consultation exercise on ways to tackle future use of disguised remuneration tax avoidance.
In his submission to HMRC, Mr Turner stated: “The consultation sets out an impressive array of rules that HMRC has introduced in recent years in an attempt to restrict the ability of promoters of tax avoidance schemes to operate effectively.
“However, all of these measures, the measures that HMRC say they will take in the future, and indeed the consultation itself, stop short of the one thing that HMRC could do to effectively shut down the sale and marketing of disguised remuneration schemes.
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Hide Ad"That is the application of existing criminal law and the prosecution of people who design, operate and promote dishonest tax avoidance schemes.
"There is a myth that appears to have taken hold that the promoters of tax avoidance schemes have done nothing wrong as the promotion of a tax avoidance scheme is 'not against the law'.
"This is simply not the case where someone is involved in the promotion of a scheme that is dishonest.”
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Hide AdDisguised remuneration schemes often involve taxpayers facing large bills that the promoter had led them to believe they would not have to pay, said Mr Turner’s letter.
It added: “When looking at the details of several well known tax avoidance cases, the facts set out clearly constitute tax fraud on the part of scheme operators.
“Despite this, criminal investigations have been rare, and we are unaware of any promoter being successfully prosecuted for tax fraud.
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Hide Ad“When HMRC finds an individual or company promoting a disguised remuneration scheme the default position should be to open a criminal investigation into the promoter of the scheme.”
"HMRC should also review the cases of promoters who have ceased to operate to see if any prosecutions can be brought for historic cases of tax fraud related to the promotion and operation of disguised remuneration schemes."
An HMRC spokesperson said: “We welcome the submissions we have received and will consider them all in due course.”
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Hide AdHMRC has used criminal powers for tax avoidance in cases where there is evidence of criminality such as forged documents, and fake receipts as part of the scheme.
For example, two fraudsters, who attempted to steal more than £60 million through a fraudulent tax avoidance scheme claiming to invest in HIV research and conservation, were jailed for a total of 14 and a half years in 2019.
In 2018, a former police officer, financial adviser and a City trader were jailed for a total of eight years for a £2.4 million tax scam after an investigation by HMRC.
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Hide AdAn accountant and an independent financial adviser were convicted for attempting to steal £2.2 million in a tax fraud linked to the film industry in 2015.
A City of London Police spokesman said victims of fraud should contact Action Fraud online at actionfraud.police.uk or by calling 0300 123 2040.