Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

HMRC loses appeal over Tenon tax avoidance scheme

HMRC loses appeal over Tenon tax avoidance scheme

HM Revenue & Customs (HMRC) has lost an appeal over an insurance-based tax avoidance scheme promoted by accountancy and advisory firm Tenon.

HMRC appealed a ruling by the First Tier Tribunal to protect the scheme members from so-called discovery assessments, which allow the Revenue to ask for more information from a taxpayer relating to tax liabilities.

The Tribunal said that since users of the scheme had declared the essential features of the scheme under disclosure of tax avoidance scheme (Dotas) rules, and that HMRC officials had not decided to take action in the relevant window, the members were protected from the taxman’s demands.

The scheme members, Michael Charlton and Barbara Corfield used a second hand insurance policy scheme using AXA Isle of Man assurance policies.

Losses on selling the policies were then used to offset any capital gains they had made.

In her tax returns Corfield declared net chargeable gains of only £1,626, under the annual capital gains tax (CGT) exemption.

The net gains derived from there being gross gains in respect of disposals of quoted shares of around £197,825, and losses of £195,322.

Charlton and Corfield submitted tax returns for 2006/07 detailing the nature of the scheme in line with Dotas rules.

When they submitted their returns Charlton and Corfield knew that HMRC had challenged the scheme and the Special Commissioners had ruled a similar scheme promoted by a different company did not work, but this did not set a precedent.

Despite the enquiry window on the 2006/7 tax returns closing on 31 January 2009, HMRC waited until the Court of Appeal confirmed the scheme failed in June 2009 before it raised discovery assessments.

The Upper Tribunal judge said: ‘It is not necessary that the hypothetical [HMRC] officer should understand precisely how a scheme works…All that is needed is that from the information made available…he can reasonably be expected to be aware of the insufficiency of tax such as to justify an assessment.

‘In our judgment, as well as an officer being aware of the matters, amended in respect of the small amounts of income that were declared, he would also have been sufficiently aware of the law relating to second-hand insurance policies to be able to appreciate the unusual nature of the entries in the return.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Sam Vecht: the best opportunities in frontier markets

Sam Vecht: the best opportunities in frontier markets

Blackrock's Vecht evaluates frontier markets and explains where he sees the opportunities

Play Where A-rated Pattullo is finding the best bond opportunities

Where A-rated Pattullo is finding the best bond opportunities

Henderson Global Investors head of retail fixed income explains how he is managing his fund against the surprise current monetary policy divergence.

1 Comment Play Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Our much anticpated new series is here! We hand a black cab driver a tenner and grill the manager of the 125-year Merchants trust until the meter runs out.    

Your Business: Cover Star Club

Profile: meet the duo at the heart of Hargreave Hale's succession plan

Profile: meet the duo at the heart of Hargreave Hale's succession plan

For the first time in the company's history a non-Hargreave is now at the head of the north west broker and asset manager

Wealth Manager on Twitter