I’m not really a used car salesman, but don’t tell HM Revenue & Customs.
That seems to have been the premise for a tax ‘scheme’ recently shut down by HMRC in a legal battle.
It picked up some national press coverage over the past few days, as at least one high profile celebrity (a former Radio One DJ) was taking advantage of the tax avoidance scheme.
The scheme was used by 450 individuals and deprived the Exchequer of £290m in tax.
Tax avoidance is perfectly legal, whereas tax evasion is not, but recent cases have shown the Revenue (and the court of public opinion) taking an increasingly hard line against individuals who use anything other than the most vanilla tax planning strategies to avoid tax.
‘Working Wheels’, as the scheme was known, promoted between 2006 and 2008.
The scheme appears to have operated by making it appear the individual had incurred large fees to borrow small amounts of money they did not need in order to invest it in a trade they had no desire to pursue.
These fees were then used as tax losses against genuine earnings.
Perhaps the first clue for the former DJ that not all was as it seemed was that he was not, in fact, engaged in the trade of selling used cars?
He has since taken to Twitter to admit his naivety in joining the scheme, stating his ignorance of tax planning and the fact he had relied on professional advice.
Upon advice, I signed up to a scheme which I was assured was legal. Despite this, my knowledge of the dealings of the scheme were naive.
— Chris Moyles (@CHRISDJMOYLES) February 21, 2014
I’m not a tax expert and acted on advice I was given. This was a mistake and I accept the ruling without reservation.
— Chris Moyles (@CHRISDJMOYLES) February 21, 2014
There are a couple of simple rules to follow when it comes to all things financial, including tax planning.
If it seems too good to be true, it usually is.
If you don’t understand the scheme, don’t get involved.
Stick to these two simple rules and your financial life will be much, much easier. You might even avoid an expensive, stressful and embarrassing legal battle with HMRC about your tax affairs.
