Anti-avoidance ― hallmark schemes ― pre-1 January 2018

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Anti-avoidance ― hallmark schemes ― pre-1 January 2018
  • What is a hallmark scheme?
  • Connected parties
  • Parties enter into confidentiality condition agreements
  • Sharing the tax advantage
  • Contingent fees
  • Pre-payments between connected parties
  • Funding
  • Off-shore loops
  • Property transactions between connected parties
  • More...

Anti-avoidance ― hallmark schemes ― pre-1 January 2018

This guidance note provides an overview of the disclosure regime that relates to hallmark anti-avoidance schemes. This note should be read in conjunction with the VAT avoidance - introduction, VAT avoidance - listed schemes and Anti-avoidance - analysis of relevant case law guidance notes.

What is a hallmark scheme?

A scheme is a plan of action that has been entered into and includes transaction, series of transactions and arrangements. Businesses will not be automatically caught by these provisions if they claim all of the VAT that they are entitled to using any ESC, option to tax, etc unless these actions form part of an overall VAT planning arrangement.

HMRC would view the presence of the following as potential hallmarks that the business has entered into a VAT planning arrangement:

Connected parties

The parties involved in the scheme are connected parties. Please see the Anti avoidance - introduction guidance note for a definition.

Parties enter into confidentiality condition agreements

If the parties enter into an agreement that limits or prevents a party from disclosing details regarding how the scheme creates a tax advantage, this would be seen as a hallmark. These agreements are intended to protect the competitive advantage of the creator or promoter of the scheme, and a potential beneficiary of the scheme, would be required to sign such an agreement before any details are provided regarding how the tax advantage would be achieved if they participate in the scheme.

It should be noted that an adviser would normally insert a general confidentiality clause into their standard terms of engagement that denies a client the right to disclose advice onto a third party and would not be viewed as a hallmark if it relates to all advice provided, not just in relation to the scheme. The confidentiality clause would be viewed as hallmark where:

  1. it is intended to prevent or limit the ability of a person to disclose information about how the scheme gives rise

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