Recommendation 5

It is too easy for taxpayers to be unwittingly lured into tax avoidance schemes. HMRC introduced the loan charge in 2019 to recoup tax from people who used ‘disguised remuneration’ schemes to avoid tax. The imposition of the loan charge on taxpayers who were unknowingly sold an unlawful scheme by unscrupulous tax agents has led to some being financially damaged. HMRC’s strategy for tackling tax avoidance is two-pronged. It wants to reduce the supply of, and demand for, avoidance schemes. It said there are now 20 to 30 unscrupulous promoters of tax avoidance schemes, most of which relate to employment taxes. These promoters are mainly based outside the UK and have complex organisational structures which make them more difficult to investigate. However, HMRC considers it has sufficient powers to tackle promoters of avoidance schemes. On the demand side, HMRC is trying a new approach to identify and alert users of avoidance schemes and offer them help to get out. We welcome this change in approach, and HMRC should develop it by helping taxpayers not to enter into the schemes in the first place. Recommendation: To reduce the risk of taxpayers getting involved in tax avoidance schemes, HMRC should, in its Treasury Minute response, set down how it will make it easier for taxpayers to identify illegal schemes and the unscrupulous tax agents who promote them.