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View the article online at http://citywire.co.uk/wealth-manager/article/a762394

What will come onto HMRC's radar next?

by Danielle Levy on Jul 18, 2014 at 10:22

What will come onto HMRC's radar next?

Celebrities have dominated headlines recently for all the wrong reasons, slapped with ‘tax avoider’ stamps after backing schemes that have retrospectively been deemed as going too far.

While the upshot is likely to have sent the coolest PRs into a panic over the public’s perception of their clients, it is now clear that tax avoidance schemes are firmly on HM Revenue & Customs’ (HMRC) radar. And many view HMRC’s new wide ranging powers – which include demanding payments upfront before a legal tax liability is established – as a profound game changer.

Other powers allow it to take money direct from a bank account, even if the concerned person does not agree there is a liability.

Add in the fact that new data will now reach tax authorities, gathered from intergovernmental agreements, and you can understand why tax planning is now looking much trickier.

Liberty, a £1.2 billion tax avoidance scheme, is the latest to have caught both HMRC and the media’s attention. It generated huge offshore losses, which could be written off against investors’ income tax bills. The Times claims Sir Michael Caine, George Michael, Anne Robinson and singer Katie Melua all poured money into the scheme.

HMRC’s legal challenge went to court in March and is set to go to tribunal, but the new powers will enable HMRC to take the disputed revenue upfront.

This new measure will similarly leave a raft of other celebrities, which The Times reported to include David Beckham, Andrew Lloyd Webber, the Bank of England’s Clara Furse and Sir Bob Geldof, facing a £520 million bill following their investment in the Ingenious Film Partners 2 LLP.

This scheme helped to fund the likes of Life of Pi and Avatar and made losses of £1.3 billion, which investors then offset against other income to reduce their tax bill. However, HMRC believes the film scheme was simply set up to avoid tax.

‘HMRC is now looking for upfront payments from people entering schemes and will have the ability to raid bank accounts if a liability exists. These upfront payments will make life more difficult,’ said Andrew Watt, a partner at Watt Busfield Tax Investigations.

‘A scheme might save you £1 million but you have got to put that money upfront first. It is a significant change that will help to curb people’s enthusiasm for avoidance schemes,’ he added.

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