The number of schemes disclosed to HMRC fell from 121 to 77, a fall of 36%, in the year to September, according to figures obtained by law firm Pinsent Masons.
The disclosures have been falling ever since the introduction in 2004/5 of the Disclosure of Tax Avoidance Schemes (DOTAS) programme, when 587 were disclosed.
Pinsent Masons says HMRC is “winning the battle” on tax avoidance with its tougher approach.
Jason Collins, head of tax at Pinsent Masons, said, “The figures show that HMRC is taking a tougher stance on tax avoidance and winning the battle, if not the war, to eliminate elaborate tax schemes. They have been successful in dissuading the bigger accountancy firms from creating new tax avoidance schemes with many major professional services firms now avoiding the more extreme forms of tax planning as it carries with it a reputational risk.”
He added, “Companies and high-earning tax payers may still look for new ways to minimise their tax bill but the fact that there were just a fraction of new schemes last year compared to previous years suggests that HMRC is doing a better job at using its understanding of existing avoidance schemes to “police” the promoters and close loopholes in the law – often before they can be fully exploited.
“The additional information is also helping HMRC to take action against any particular schemes that cross the line from legal tax avoidance to illegal tax evasion – and HMRC won't hesitate to use it criminal powers, such as "dawn raids" and arrests, where there is even a whiff that a scheme is “make believe” or involves misleading statements.”
Despite reducing avoidance, Pinsent Masons says HMRC could potentially recover a still greater proportion of ‘missing’ taxes by doing more to encourage individuals and businesses to come forward and settle their tax liabilities if they want exit a tax avoidance scheme they might have entered into five or 10 years ago.
The pace at which the old schemes are closing is creating an “enormous” backlog in the system, it says.