Those caught using tax avoidance schemes will have to pay upfront, HMRC warns.

The government is in the process of changing the economic incentives “to avoid tax and promote tax avoidance.”

This follows the Autumn statement 2013 when it was announced that HMRC will ask for upfront payments from taxpayers using avoidance schemes the same or similar to those that have already been defeated in court.

A recent consultation looks at proposals to add to the circumstances when HMRC will seek upfront payments from tax avoidance scheme users.

These proposals include any disputed tax associated with schemes that are subject to the Disclosure of Tax Avoidance Schemes (DOTAS), as well as taxpayers engaging in the most abusive tax avoidance and therefore being investigated under the government’s new anti-avoidance legislation – the General Anti-Abuse Rule (GAAR).

The incentive aims to remove the tax avoidance tactics of  holding onto disputed tax – sometimes for years – while their case is being investigated.

David Gauke, Exchequer Secretary to the Treasury said:

“The government has been absolutely clear that we will not tolerate aggressive tax avoidance and will take action to make sure people pay the taxes that are due. While the vast majoirty of taxpayers play by the rules, there is still a minority who will engage in artificial schemes as a way to avoid their responsibilities.”

Although this new incentive won’t change the underlying tax rules, these changes will “significantly shift the economic balance” by helping HMRC resolve around 65,000 cases currently being investigated.

The aim is not to remove the advantage that tax avoidance scheme users have but to send a “clear message” to those using the schemes to avoid paying tax altogether.