HMRC takes action against notorious tax avoidance specialist

HMRC says it has has taken landmark action against a notorious promotor of offshore tax avoidance schemes who it says has cost the exchequer £1bn in lost revenue.

The tax agency said it issued stop notices to Paul Baxendale-Walker covering two offshore arrangements, the first time it said such action has been taken against an individual rather than a company. He could face criminal prosecution if he does not comply.

The news follows revelations last year by the Bureau of Investigative Journalism (TBIJ) that HMRC had squandered a chance to levy a £14m penalty against Baxendale-Walker after making a “rudimentary” error at tribunal.

Stop notices are issued under the Promoters of Tax Avoidance Schemes (POTAS) legislation. They require the recipient to immediately cease promoting specified avoidance schemes.

A new criminal offence for promoters who fail to comply was introduced through new legislation last year.

Jonathan Smith, HMRC’s director of counter avoidance, said: “The courts have already concluded that Mr Baxendale-Walker designed and sold multiple tax avoidance schemes that don’t work as claimed, and now these stop notices send a clear message that we’ll use every tool at our disposal to protect public finances from tax avoidance schemes.”

Baxendale-Walker gained notoriety after designing a number of tax avoidance schemes in the 1990s and 2000s that were later found not to comply with tax law. According to one court filing, HMRC estimates his schemes to have cost £1bn in lost taxes. (Baxendale-Walker disputed this figure to TBIJ but did not provide evidence to support his claim.)

A lawyer for Baxendale-Walker said this is not the first stop notice against an individual as they are currently working on another such case.

When contacted directly, Baxendale-Walker told TBIJ that he is not currently involved in “transactions of any kind” and that HMRC was “trying to prohibit lawful speech”. In an online blog, he said he was never served with a notice, in contravention of the law.

TBIJ’s story last June reported a tribunal judgment that raised serious questions about HMRC’s handling of his affairs.

HMRC was attempting to bring a penalty based on an information notice it obtained at tribunal in 2022, to force Baxendale-Walker to hand over documents to the authority. Baxendale-Walker told TBIJ that he did not have the documents to begin with, and HMRC said it would not comment on individual cases.

HMRC agreed to an extension requested by Baxendale-Walker, but in doing so made one of two mistakes, both of which involved missing a deadline for imposing a penalty. The judge then struck out the proposed £14m fine in its entirety.

Ray McCann, a senior HMRC investigator of more than 30 years, described the episode as “screwing it up 101”.

At the time Baxendale-Walker denied a “false collection of allegations” and said the £14m penalty was “a fiction … conjured” by HMRC.

HMRC said the stop notices issued to Baxendale-Walker this week support the government’s plan to close the tax gap. This stood at almost £40bn in 2022/23, the most recent year for which figures are available.