HMRC is set to collect over £40 million in unpaid tax from users of a complex tax avoidance arrangement. The First Tier Tribunal has ruled that the promoters, Hyrax Resources, failed to inform HMRC about the scheme. It has ordered them to reveal the names and addresses of over 1,000 users who are now likely to face large tax bills.

Hyrax Resourcing was a tax arrangement set up to enable high earners to take their earnings as loans, avoiding the need to pay income tax and national insurance. Hyrax did notinform HMRC abo

ut the scheme, as it was required to do under the Disclosure of Tax Avoidance Schemes (DOTAS) rules. DOTAS was introduced in 2004 to help HMRC combat tax avoidance and requires schemes to be pre-registered with the taxman.

Now Hyrax will face a fine of around £6 million and a further £5,000 a day if it does not send information about the users of the scheme to HMRC.

Users of the scheme may well consider negligence claims against advisers who introduced them to the scheme, or who were consulted by the user regarding the scheme,” warned James Burgoyne, Director – Claims & Technical, Brunel Professions.  “It is clear that they are already being targeted by solicitor firms willing to act for them in such a claim. Financial Advisers will need to be able to provide evidence either that they owed no duty to advise on the scheme, or that they fully advised their clients about the details and risks if they are to defend any future negligence claims.”

HMRC has issued a press release on the First Tier Tribunal ruling.  Reports on the case have been published by Wright Hassall and Citywire Wealth Manager.

Brunel secures competitive professional indemnity insurance cover for accountants and financial advisers. To find out more call Mark Sommariva on 0203 475 3275.