There are all kinds of cases which deal with tax avoidance. This case concerns Halsall and Ors v Champion Consulting Ltd and Ors. The issues began in 2003 when Champion Consulting Ltd promoted a selection of tax saving initiatives which the court referred to as being ???Charity Shell??? schemes and ???Scion??? film schemes.
Background: Tax Avoidance and Charitable Donations
Shares in a newly formed business which was to be listed on AIM were donated to charity. This charity was not likely to receive any profit as a result. Those behind the scheme would obtain significant tax relief because the share values were artificially manipulated.
A second scheme was deemed to be strong and involved the exploitation and sale of film rights which would result in sideways loss relief. The outcome that was intended from this scheme was to eliminate tax by potentially, millions of pounds through legitimate means.
In both of these cases the HMRC launched full investigations into tax avoidance which proved successful. The result was a complex and lengthy legal case which reached the High Court. The judge presiding over the case reached a conclusion that the claims are invalid. Each of the claims failed because the claimants did not bring the case to court within a three year time period in line with the statute of limitations.
There are a number of valuable lessons to be learned from this case and it goes to show that if a scheme looks too good to be true, this is usually the case. Furthermore, if a ???tax advisor??? helps a client to implement a scheme which goes wrong, there is a risk to the advisor that they could also end up in the High Court. It is strongly advised that all engagement letters are robust and they state what happens should the scheme fail. Tax avoidance is a serious offence and the penalties can be severe.