HMRC has defeated an avoidance scheme mainly used by property developers and IT contractors. As such HMRC may be owed up to £200M in unpaid tax.
The scheme, which was used by more than 2,000 people, aimed to exploit the UK’s double taxation agreement with the Isle of Man.
Those using the scheme believed that it would reduce their rate of income tax to 5% or less. The scheme was blocked by parliament in 2008 and HMRC was given allowances to enforce the new legislation retrospectively.
Electrical engineering consultant Robert Huitson subsequently challenged the ruling but, following a decision by a first tier tribunal, that appeal was dismissed.
Jim Harra, HMRC’s director general of business tax, is quoted by economia:
“This is yet another example where some people try to abuse the tax system to deprive the UK of money for vital public services.All very well and good (disregarding the meaningless and woolly"fair share" comment). However, retrospective legislation is a dangerous path to take!
This is unfair on the majority who pay their fair share.”
Tax does have to be taxing.
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