HMRC using advertising rules to battle tax avoidance schemes

HMRC has lodged complaints with Advertising Standards Agency (ASA) that have been upheld, affecting what promoters of tax avoidance can claim in adverts and online.

Last week HMRC published a 'spotlight' saying that the ASA had ruled against misleading advertising of a stamp duty land tax (SDLT) scheme for residential property by promoter Fiducia Wealth and Tax. Under a heading “Calculate Stamp Duty Land Tax We Will Save You A Minimum Of 60%”, website text stated “We do not promote nor advocate stamp duty avoidance schemes. Instead we seek to efficiently plan our clients’ property tax affairs by only utilising government approved statutory tax rules that are contained within the tax legislation, so that our clients only pay the tax intended by Parliament”.

The ASA upheld a complaint from HMRC that the claims were misleading as they suggested that the arrangements were not a scheme of tax avoidance and would not be subject to challenge from HMRC, whereas the scheme clearly amounted to tax avoidance and HMRC did not consider that it worked. 

The ASA also ruled that the Fiducia website “misleads by omission” by failing to mention the "many government tools and policies" aimed at counteracting tax avoidance schemes, such as the general anti-avoidance rule (GAAR).

The ruling followed a previous ruling in February concerning the advertising of contractor loan schemes and a ruling of the ASA in October 2017 relating to the advertising of disguised remuneration trust schemes.

"Each of these ASA ruling sets an example, so other promoters cannot make the same claims about similar schemes. Getting the ASA to rule against a promoter of each of the types of scheme that HMRC is trying to stop people from using, sends a clear message to other promoters and potential users of these types of scheme," Porter said.

Under a contractor loan scheme, the scheme pays contractors a small part of their salary as PAYE income, with the rest paid as a loan, on which it is claimed no income tax or national insurance is due. The ASA ruled in February that claims on the Williams Gordon website that if you used the scheme you could “take home up to 92% of your pay” and that the schemes are “fully compliant with the necessary HMRC legislation and with all current IR35 policies”, were misleading.

The ASA disguised remuneration scheme ruling related to the Knight Wolffe income trust, which aimed to divert income from a business into a trust, with the trust then loaning funds back to the business owners or their families, claiming that no income tax or national insurance liabilities arise.

The ASA ruled that the use of the HMRC logo on the website and claims that the scheme was “known and accepted by HMRC since 1994” and “approved by the House of Lords in 2005” misleadingly implied endorsement by those bodies.

The companies that have been ruled against and other promoters of similar schemes must remove the relevant claims from their advertising or risk facing ASA sanctions for failing to comply with its rulings.

"Getting the ASA involved is just another way for HMRC to stop people from using tax avoidance schemes. It is much less resource intensive for HMRC to stop a scheme being used in the first place  than having to track down and investigate scheme users to recover underpaid tax," Porter said.

He said that another example of the use by HMRC of other agencies to deter those involved in tax avoidance was getting the Solicitors' Regulation Authority (SRA) to warn solicitors against becoming involved in the implementation or promotion of SDLT schemes. An SRA warning notice issued in 2012 warned solicitors that involvement in SDLT schemes could amount to a breach of their professional conduct obligations.

From 16 November 2017 advisers who enable the use of 'abusive' tax arrangements can be liable for a penalty if the arrangements are later defeated. Arrangements will be abusive if they have been counteracted by the GAAR or if they could have been counteracted had the taxpayer not settled with HMRC.

"Although using a tax avoidance scheme is not illegal, HMRC is doing its best to disrupt the 'supply chain' for such schemes, by deterring advisers from implementing them or recommending them to their clients," Porter said.