On 5 November 2014 HM Revenue and Customs (HMRC) issued a list of 10 points that it suggests taxpayers ought to know about tax avoidance schemes. The list sets out the risks that people face when they sign up to a tax avoidance scheme. These include not only the possible monetary costs and reputational damage of tax avoidance, but also a potential criminal conviction.

According to HMRC the 10 things to know about tax avoidance are:

1. According to HMRC most tax avoidance schemes do not work. If the avoidance scheme does not work the taxpayer will have made an incorrect tax return which is not in accordance with the law. The taxpayer will be legally obliged to pay tax that is due and may be charged penalties if this is not done.
2. It could cost the taxpayer more than expected. Avoidance schemes are complex. They can give rise to unintended additional tax consequences, and the fees paid to the promoter of the tax avoidance scheme do not count as tax paid.
3. There may be significant legal fees to pay. If the scheme is taken to litigation, legal fees will arise. The promoter may ask the taxpayer to pay into a ‘fighting fund’ up front.
4. The taxpayer could face criminal conviction. If the taxpayer deliberately misleads or conceals information from HMRC prosecution is possible.
5. The taxpayer could face publicity as a tax avoider. If a person are named in court papers when the case is litigated, or in public registers, the taxpayer could be reported in the media as a tax dodger.
6. Obtaining an avoidance scheme reference number from HMRC does not mean the department has cleared the scheme. HMRC issues these numbers when a scheme has signs of being designed to avoid tax.
7. Use of a scheme could mark the taxpayer out as a high-risk taxpayer, which means that all of the individual’s tax affairs will be closely scrutinized in future, not just the claim for tax relief under the avoidance scheme.
8. HMRC is likely to beat the scheme in court. HMRC wins eight out of ten cases where taxpayers and promoters take avoidance schemes to court.
9. The risk is normally all the taxpayer’s own risk. It is unlikely that the promoter of a scheme will give the taxpayer a guarantee that a scheme will work. The promoter may not be there to support the taxpayer once HMRC starts investigating the individual’s tax affairs. Some promoters set up simply to sell the avoidance scheme, and then disband.
10. The taxpayer will have to pay the tax up front anyway. There will not be a cash-flow advantage while HMRC investigates a scheme. New legislation requires payment of the disputed tax up front.

This list has been issued by HMRC in an attempt to deter the use of avoidance schemes. The issue of avoidance has been in the news in the UK  for some time and the public and media are concerned about both corporate tax avoidance and individual income tax avoidance. Certain high profile individuals have recently been in the news for using tax avoidance schemes and there is public discussion of the legal and ethical issues involved in tax avoidance.