media centre

How many times have you wished you'd had the benefit of foresight or hindsight when making business decisions? Speak to one of our experts today.

Tax Avoidance Schemes - Take Care

Entering into tax avoidance schemes is not for the faint-hearted and, once embarked upon, they can be very difficult to leave. In one case, participants in two such schemes failed to convince the High Court to turn back the clock and free them from the potentially serious financial consequences of their involvement.

The participants had entered into the schemes on the advice of a firm of tax and accountancy advisers. HM Revenue and Customs (HMRC) had raised assessments against them for unpaid tax, interest and penalties on the basis that neither scheme was effective.

In order to strengthen their hand in resisting at least the claims for penalties and interest, the participants argued that the contracts by which they joined the schemes were not worth the paper they were written on and should be rescinded. Their application was strenuously resisted by HMRC on the basis that a ruling in the participants' favour could have wide implications for other cases.

It had been established in previous litigation that, unbeknown to the participants, the advisers had received secret commissions – effectively bribes – from an intermediary which stood between it and the providers of the schemes. However, the providers were not involved in that wrongdoing and the Court found no reason why the contracts between them and the participants should be rescinded.

Arguments that rescission was justified by undue influence being brought to bear on the participants by the firm of advisers were also rejected, as were claims that the validity of the contracts was undermined by common mistake. The ruling means that the only recourse to compensation for the participants in the schemes will be to launch legal action for damages against the firm.

HMRC have gained a number of victories recently in their court cases involving tax avoidance schemes. In one such case, a ruling was made which should net the Exchequer nearly £500 million.

Close

How can we help?

Please fill in this form and we'll get back to you as soon as possible.

Please enter your name
Please enter your phone number
Please enter your email address
Please let us know how you heard about us
Please enter your enquiry
One more thing... Please enter the verification code
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.