Q. I’ve been approached by a firm that claims it can reduce my tax liabilities substantially via a tax avoidance scheme that they are promoting.
They want me to invest a sizeable amount and in return my income tax bill will reduce substantially.
I have to admit that I’m a little wary of their approach. What are your thoughts?
A. You’re right to be cautious.
Whilst we can’t provide tax advice in our response, we can hopefully steer you towards useful resources that will enable you to become more informative on the subject.
One of the crucial points to bear in mind with these arrangements is, regardless of whether they ‘work’, the promoter of the scheme will earn their fee. And I can tell you that the size of the fee is usually not insignificant.
If the scheme subsequently fails, that is it is disapproved by HMRC, don’t automatically think that you’ll be able to claw back any losses from your professional adviser.
This article provides a good overview of this point.
And as the article says, if HMRC does disapprove the scheme you’ve invested in, expect them to penalise you with penalties, unpaid tax and interest.
That said, I’m sure some schemes do work for those that invest in them. My advice is to really do your homework and to make the MOST informative decision that you can.
Don’t be tempted by the glossy brochures that will no doubt be put in front of you. Weigh up the pros and cons and hopefully you’ll end up in the right place.
Good luck!
