The Inland Revenue used to only worry about legal tax avoidance schemes being just too good in terms of doing what they said on the tin - not paying tax. But it seems that the Exchequer has developed a concern for taxpayers being sold poor schemes by accountants, and then having to pay the tax anyway. Buried away in the documentation for the UK Budget last month is this statement: 'The Government is aware of continued marketing and use of avoidance schemes which are believed not to deliver the tax advantages advertised.'
On close inspection it seems that rather than worrying about the flakiness of tax schemes, the UK Treasury is concerned about the hidden benefit of using them regardless of whether they are any good or not. A spokeswoman said: 'some taxpayers are prepared to enter into such schemes to exploit a cashflow advantage of retaining tax while continuing to dispute a liability, in some cases even where the courts have ruled against similar transactions.'
Derek Andrews, tax partner at Andrews Tax Consulting said: 'Settling a dispute can take two or three years, during which time interest may be accruing to Revenue & Customs on the tax owed, but only at a low rate. That means the money involved can be used more profitably elsewhere. It is a cheap form of finance.'
He added that the proposed remedy - an official list of the dud schemes and the penalties for using them - was 'better than the alternative which would be to jack up the interest rate the Revenue charges as happens in Ireland'.
