An email is being widely circulated which reports that HMRC has dropped its criminal investigation into the individuals behind the tax planning HMRC calls Clavis Herald SPT. The report appears to be correct based on our enquiries with parties linked to the case. This is yet another high-profile case of an HMRC criminal investigation being launched very publicly that has gone on for many years only to be dropped later without any public comment.
The Clavis Herald planning has received a lot of attention (see our previous articles) because HMRC took an unprecedented approach of assuming anybody who entered into the planning was careless by virtue of participation alone. This was used to justify making extended time limit assessments and launching a settlement offer where participants were required to pay tax, interest and penalties. HMRC’s correspondence was drafted with absolute conviction, no doubt buoyed by the very public criminal case, and many participants settled out of fear that worse could happen, even if they didn’t think they had done anything wrong.
That approach and HMRC’s position, however, has been looking flawed for some time. The judges in the Avonside Roofing and Port-view cases were not impressed by HMRC’s assertions. Now we see that the bedrock of HMRC’s policy, the alleged criminality linked to the planning, was also flawed. What next for the participants who are fighting HMRC and, perhaps more importantly, for those who settled based on what HMRC was alleging, when their legal tax position is likely to be different to what HMRC asserted? We will look at the issues relating to this case in more detail in an upcoming article.