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School fees & tax avoidance

On 2 June 2023, HMRC published Spotlight 62 reporting its views on a tax avoidance scheme being marketed as an option available to help fund the cost of education fees.

HMRC highlighted a dividend scheme which it says breaches anti-avoidance laws in place to prevent parents taking advantage of their child’s tax status.

The arrangements typically involve parents using an existing company, or setting up a new company, and gifting valuable shares to a grandparent who, in turns, gifts them to their grandchild via a trust.  The dividends on the shares are then taxed at the child’s tax rate with a view to saving thousands in tax.

HMRC has been increasingly cracking down on tax-avoidance schemes over the past 20 years, including introducing the DOTAS (Disclosure of Tax Avoidance Schemes) regime which forces promoters to inform HMRC of their existence where one of the main benefits of the scheme is enabling a tax advantage.

Tax avoidance is, in fact, legal, but tax evasion is not. Many high-profile individuals such as the Beckhams, Gary Barlow and Jimmy Carr, have been criticised in the press for not paying their fair share of taxes on their high incomes. However, in our experience, it’s not always the individuals who should be criticised.

The world of tax and tax planning is exceptionally complex; the average person has limited understanding, particularly when it comes to tax mitigation. In our experience, those who end up in tax avoidance schemes tend to do so in complete reliance on expert professional advisers who tell them that the plan is a legitimate way to pay less tax. Like other professionals such as doctors and lawyers, people place their trust in those who profess to be expert tax advisers and rely on the, sometimes inadequate, advice they were given.

What to do if you’re using these or similar arrangements

 Anyone concerned about their participation in a tax avoidance scheme should consider getting independent legal advice. Our Financial Litigation team have represented many individuals who found themselves involved in problematic tax avoidance schemes, including film schemes, which had multi-million-pound consequences for participants.

If you would like to, confidentially, discuss the possibility that you were mis-advised or misled when you agreed to participate in a tax avoidance scheme without obligation, please get in touch.


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