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HMRC: Re-writing the rules

For many, many years there has been a clearly defined line between what constitutes legal tax avoidance and illegal tax evasion it would appear that line is about to be erased by an amendment to the Finance Bill which introduces a new concept – tax abuse.

“Tax abuse means any arrangement that, having regard to all the circumstances, it would be reasonable to conclude is an arrangement that has no business, social or other purpose than the obtaining of a tax advantage”.

It will be an offence to promote a scheme which meets the definition of & lsquo;tax abuse’ and a promoter who is found guilty of such an offence would be liable to be fined. Who would be defined as a scheme & lsquo;promoter’ is open to debate but there is speculation that it could include recruiters who recommend tax avoidance or should we now say tax abuse schemes to contractors. The legislation defines a promoter as:

“a person who makes a firm approach to another person in relation to the relevant proposal with a view to making the proposal available for implementation by that person, or any other person” or “a person who makes the relevant proposal available for implantation by other persons”.

A recruiter who recommends a tax abuse scheme would almost certainly, at the very least, be considered an & lsquo;intermediary’ within the legislation:

“&hellipcommunicates information about the relevant proposal to another person in the course of business”.

Therefore, with this increasing raft of new legislation and rule changing, it has never been more important for recruiters to make compliance the foundation for any PSL.



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