It would seem that 'avoidance schemes' are those that give a tax advantage to the tax payer - HMR&C have clarified:
6.2.2 Meaning of 'tax advantage' (FA 2004, s.318)
The definition of 'tax advantage' is drawn from the definition of tax advantage
in ITA 2007 s687 and CTA 2010 s732 (formerly s709 ICTA 1988). Unlike
ss687 and 732 the definition makes specific reference to the deferral of tax
and the avoidance of an obligation to deduct tax (for example under PAYE). It
should not be inferred from this that ss687 and 732 do not extend to deferral
or avoiding an obligation to deduct tax.
In the context of ss682 ITA 2007 and s731 CTA 2010 the Courts have
considered ss687 and 732 on a number of occasions. We expect the existing
body of case law to apply equally for disclosure purposes. From these cases
some general points can be made:
The definition of tax advantage in ss687 ITA 2007 and 732 CTA 2010 is very
widely drawn and consequently we expect that FA 2004, s.318 will also be
construed widely. It includes the avoidance or reduction of a charge to tax, a
relief from tax, repayment of tax and as mentioned the deferral of tax or the
avoidance of an obligation to deduct tax.
Where the scheme is expected to result in tax being avoided or reduced
then the long-standing Judgment of Lord Wilberforce in CIR v Parker (1966
AC 141) applies and the existence of a tax advantage is tested on a
comparative basis.
In a more recent case Sema Group Pension Fund (2003 STC 95) Lord
Justice Parker said that 'what the draftsman was manifestly trying to do
when defining 'tax advantage' in s709(1) was to cover every situation in
which the position of the taxpayer vis-à-vis the Revenue is improved in
consequence of the particular transaction or transactions'. This has been
regarded by some outside commentators as widening the definition still
further. However, in our view Sema is consistent with earlier cases.
- 28 - DOTAS Guidance with effect from 6
th
April 2011
A relief or exemption from tax, substantial shareholdings, loss relief, group
relief, etc will give rise to a tax advantage as defined.
In deciding whether the necessary comparison can be made it should be
noted that the very wide range of possible ways in which tax arrangements
might be structured made it impossible to outline in regulations the range of
schemes likely to come within the disclosure rules. Such schemes may
involve for example, income being received in capital form or rewards for
remuneration being structured to fall outside the provisions of ITEPA or an
imbalance between the economic cost of the tax advantage and the value of
that advantage to the taxpayer.
For National Insurance contributions purposes, the definition potentially
applies to all classes of National Insurance.
(From http://www.hmrc.gov.uk/aiu/dotas.pdf - Disclosure of Tax Avoidance Schemes)
So that's cleared that up then.
6.2.2 Meaning of 'tax advantage' (FA 2004, s.318)
The definition of 'tax advantage' is drawn from the definition of tax advantage
in ITA 2007 s687 and CTA 2010 s732 (formerly s709 ICTA 1988). Unlike
ss687 and 732 the definition makes specific reference to the deferral of tax
and the avoidance of an obligation to deduct tax (for example under PAYE). It
should not be inferred from this that ss687 and 732 do not extend to deferral
or avoiding an obligation to deduct tax.
In the context of ss682 ITA 2007 and s731 CTA 2010 the Courts have
considered ss687 and 732 on a number of occasions. We expect the existing
body of case law to apply equally for disclosure purposes. From these cases
some general points can be made:
The definition of tax advantage in ss687 ITA 2007 and 732 CTA 2010 is very
widely drawn and consequently we expect that FA 2004, s.318 will also be
construed widely. It includes the avoidance or reduction of a charge to tax, a
relief from tax, repayment of tax and as mentioned the deferral of tax or the
avoidance of an obligation to deduct tax.
Where the scheme is expected to result in tax being avoided or reduced
then the long-standing Judgment of Lord Wilberforce in CIR v Parker (1966
AC 141) applies and the existence of a tax advantage is tested on a
comparative basis.
In a more recent case Sema Group Pension Fund (2003 STC 95) Lord
Justice Parker said that 'what the draftsman was manifestly trying to do
when defining 'tax advantage' in s709(1) was to cover every situation in
which the position of the taxpayer vis-à-vis the Revenue is improved in
consequence of the particular transaction or transactions'. This has been
regarded by some outside commentators as widening the definition still
further. However, in our view Sema is consistent with earlier cases.
- 28 - DOTAS Guidance with effect from 6
th
April 2011
A relief or exemption from tax, substantial shareholdings, loss relief, group
relief, etc will give rise to a tax advantage as defined.
In deciding whether the necessary comparison can be made it should be
noted that the very wide range of possible ways in which tax arrangements
might be structured made it impossible to outline in regulations the range of
schemes likely to come within the disclosure rules. Such schemes may
involve for example, income being received in capital form or rewards for
remuneration being structured to fall outside the provisions of ITEPA or an
imbalance between the economic cost of the tax advantage and the value of
that advantage to the taxpayer.
For National Insurance contributions purposes, the definition potentially
applies to all classes of National Insurance.
(From http://www.hmrc.gov.uk/aiu/dotas.pdf - Disclosure of Tax Avoidance Schemes)
So that's cleared that up then.
