Tax Avoidance Firm Loses ‘HMRC Approved’ Ad Challenge

A ruling from advertising watchdogs that carrying the HM Revenue & Customs on advertising materials is misleading leaves the way open for government departments to challenge firms over misleading consumers.

The Advertising Standards Authority (ASA) investigated a web site and leaflet published by tax and wealth advisors Knight Wolffe after a complaint from HM Revenue & Customs.

HMRC objected to four points –

• The web site carried the HMRC logo and stated the firm’s income trust was ‘known and accepted by HMRC since 1994’ which suggested HMRC endorsed the firm’s advice
• The advertising left out that costs might arise if HMRC challenged the scheme
• Arguments the income trust was not a tax avoidance scheme as HMRC believed it was
• Claims about minimising tax by using the trust were misleading

Scheme does not work, says HMRC

The trust was a tax-saving scheme for businesses which HMRC claims does not work. Knight Wolffe argues the trust can save businesses up to 87% of corporation and income tax each year.

“HMRC stated it was clear that the schemes did not work and that tax was due at the time the schemes were entered into,” said the ASA.

“HMRC was investigating and challenging the use of the schemes and were concerned it might result in those that had used the Knight Wolffe Income Trust, including small business owners, sole traders and the self-employed, facing a larger than expected tax bill, as they would be obliged to not only pay the tax, but the interest accumulated on it, as well as potential penalties.”

Complaints upheld by watchdog

The ASA upheld each of HMRC’s complaints and ordered that Knight Wolffe must not publish the advertising again and should not use the HMRC or imply their scheme was endorsed by the tax man or the House of Lords without supplying evidence that this was the case.

As of September 12, Knight Wolffe had not removed the offending advertising.

The ruling leaves the way open for HMRC to challenge other tax schemes which claim ‘HMRC approval’ as a marketing ploy to encourage customers to sign up for their services.

Other official agencies could also complain about paid-for services using their logos for promotion when the same service is offered online for free.

Complaining to the ASA is also cheaper and quicker than challenging promoters in court.