HM Revenue and Customs issues a warning about a scheme designed to exploit an advertising loophole, risking higher tax bills for participants.
HM Revenue and Customs (HMRC) has issued a warning regarding a tax avoidance scheme purportedly designed to reduce company Corporation Tax liabilities while providing directors, employees, or associates with financial returns. The announcement was made on Monday, 31 March, as HMRC cautioned that this scheme is ineffective and could lead to higher tax bills for participants.
The scheme reportedly exploits an advertising loophole, whereby a limited company purchases ‘advertising’ from a promoter of the arrangement. HMRC has indicated that the facilitator of the scheme subsequently converts about 80% of the advertised spending into loyalty points, which can be redeemed for cash, effectively allowing directors to recapture most of their ‘advertising’ expenditure. This contrived method aims to secure tax deductions for the company while minimising personal income tax liabilities for the directors.
HMRC stated, “People who use these arrangements may have to pay more than the tax they tried to avoid as well as paying interest, penalties and fees for using such schemes.” The department’s assessment indicates that the receipts and redemption of loyalty points distributed by third parties involved in the arrangement constitute taxable income for directors and should be reported. Additionally, it warned that corporation tax deductions claimed may not qualify as permissible business expenses because they do not adhere to the principle of being “wholly and exclusively” for business purposes.
Responding to the proliferation of such schemes, HMRC has urged individuals currently involved to withdraw and address their tax obligations. They can seek assistance from the department through the designated email address, [email protected]. For those facilitating these schemes, HMRC has made it clear that it will take action against promoters or enablers of tax avoidance, potentially invoking penalties for individuals who design or market abusive tax avoidance strategies.
The statement concludes with an invitation for individuals to report tax avoidance schemes or promoters using an online form that allows for anonymous submissions.
Source: Noah Wire Services
- https://www.gov.uk/government/consultations/closing-in-on-promoters-of-tax-avoidance – This URL supports HMRC’s efforts to tackle tax avoidance by proposing new measures against promoters and enablers of such schemes. It highlights the government’s intent to strengthen sanctions and increase transparency.
- https://www.gov.uk/government/collections/tax-avoidance-schemes-currently-in-the-spotlight-number-20-onwards – This URL provides information about tax avoidance schemes currently under HMRC’s scrutiny, emphasizing the risks of using these schemes and the consequences for participants.
- https://www.taxjournal.com/articles/hmrc-closing-in-on-tax-avoidance-again – This article discusses HMRC’s latest consultations and measures aimed at combating tax avoidance, including new powers for HMRC to tackle promoters more effectively.
- http://www.theguardian.com/uk-news/2025/mar/31/hmrc-warns-of-ineffective-tax-scheme – Unfortunately, this URL is not available in the search results, but it would typically provide an external news source corroborating HMRC’s warnings about ineffective tax avoidance schemes.
- https://www.accountancydaily.co/uk-tax-authorities-to-increase-inspections-of-companies – This URL is not available in the search results, but it could offer insights into HMRC’s increased scrutiny of companies to prevent tax avoidance.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
9
Notes:
The narrative is based on recent information, with an announcement made on Monday, 31 March, indicating that the content is current and not recycled from older reports.
Quotes check
Score:
8
Notes:
While there is a quote from HMRC, it doesn’t provide an original source date. The context suggests it is part of a recent statement, likely the first public mention.
Source reliability
Score:
9
Notes:
The Liverpool Echo is a reputable local news source, though not as broadly recognized as national outlets like the BBC or Financial Times.
Plausability check
Score:
9
Notes:
The scheme described aligns with common patterns of tax avoidance strategies that HMRC often targets. The details of exploiting advertising loopholes for financial returns are plausible given HMRC’s warnings.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is supported by its freshness, coming from a semi-reputable source, and the plausibility of the described scheme aligns with known practices HMRC aims to address. However, verification of the specific quote’s origin is not provided.
