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HMRC internal manual

Compliance Operational Guidance

Compliance Measures: operational guidance: Future Revenue Benefit: factors to consider when deciding if Future Revenue Benefit (FRB) is due

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Serial Avoidance
Legal interpretation
Evasion
Losses Cases - capital and trading
Pre Return Work including Clearances
Advanced Thin Cap Agreement (ATCA) and Advanced Pricing Agreement (APA)
Employer Compliance - Current Year Adjustment (CYA)
Action to tackle organised criminality
Tax Rate Changes

How many future years are likely to be affected by the intervention?

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  • Wealthy
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FRB Exclusion (applies to all cases)

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Exceptional claims for 5 years FRB

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Correction of errors - how likely is it that the error would have continued without the intervention?

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Mistake, despite taking reasonable care

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Careless (failure to take reasonable care) - Non CCM led cases

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Careless (failure to take reasonable care) - CCM led cases

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Avoidance (non serial avoidance)

Tax avoidance often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. Where you successfully challenge an avoidance scheme you may be able to claim FRB for up to 3 years for CCM cases and 2 years non CCM cases.. You can do this where your compliance check leads to adjustments that will continue to have an effect for one or more years and you are not tackling serial avoidance.

You will need to have clear evidence that the customer is no longer using avoidance schemes and that they are unlikely to enter into an avoidance scheme during the 2 or 3 years following resolution of the case. You must make a clear note for audit trail purposes of the evidence used to arrive at your decision, as such claims are likely to be subject to scrutiny.

Examples of clear evidence that a customer is no longer using avoidance schemes could include;

  • signing up to the Banking Code of Practice
  • a customer’s written tax strategy that prohibits the use of such schemes
  • the customer advises in correspondence or agrees notes of a meeting in which they undertake not to participate in such arrangements again.

Where an avoidance scheme would have generated a loss, you can consider whether you can score FRB within this 2 or 3 year period. This is because most customers using a scheme will want the loss to be tax effective within a short period of time. As above, this is only appropriate where there is clear evidence that the customer is no longer using avoidance schemes.

The reason that FRB claims following avoidance cases are limited to 2 years (excl. CCM Cases, where there is ongoing monitoring, ) is that even where there is strong evidence that the customer will change their behaviour in the near future, there is still a high risk that they will enter into another avoidance scheme. The 2 year limit strikes a cautious balance between the evidence you have recorded and the risk that customers will return to using avoidance products or arrangements in the future.

Serial Avoidance

The changing landscape of avoidance means it is no longer seen as an acceptable means of reducing tax liability among customer segments and this has positively affected the approach of key HMRC work streams

Where the customer has a history of moving from one avoidance scheme to another, you will be able to claim FRB for 2 years where you are confident that the customer is not going to enter into an alternative avoidance scheme and improvements in revenue impact and behaviour can be credibly evidenced for the duration of the FRB claim period.

If it is highly likely that an alternative scheme would be adopted, you will not be able to claim FRB.

Legal interpretation

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Evasion

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Losses Cases - capital and trading

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Pre Return Work including Clearances

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Advanced Thin Cap Agreement (ATCA) and Advanced Pricing Agreement (APA)

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Employer Compliance - Current Year Adjustment (CYA)

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Action to tackle organised criminality

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Tax Rate Changes

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