Revenue "overwhelmed" by tax avoidance Up to £10bn of tax revenue is at risk from contrived avoidance schemes sold to tens of thousands of individuals and small businesses over the past 10 years, according to official findings branded "staggering" by MPs. Margaret Hodge, who chairs the Commons public accounts committee said Revenue & Customs needed a robust plan to deal with a "mountain" of 41,000 open tax avoidance cases, of which 5,000 were more than five years old. She said: "People who pay their taxes promptly and in full will be dismayed to discover that the enormous level of tax avoidance taking place is overwhelming HMRC's [the Revenue's] efforts to combat it." At least 50 small, specialist "boutique" companies are still devising avoidance schemes that use the tax law to get advantages parliament did not intend. The number of schemes disclosed by taxpayers rose to 324 in 2011-12. The Revenue believes that most of the marketed schemes now promoted would be defeated if tested in the courts, and any tax advantage would have to be repaid. But it can take many years to investigate, litigate and resolve avoidance cases, with the oldest open ones dating back to the early 1990s. The largest sums at stake - estimated at £3.5bn - relate to partnership loss schemes, in which artificially inflated losses from investing in films or other activities are used to shelter other income. Amyas Morse, head of the National Audit Office, said: "HMRC must push harder to find an effective way to tackle the promoters and users of the most aggressive tax avoidance schemes" although he noted that it could not ban them from marketing schemes as avoidance was not illegal. The NAO said the disclosure of tax avoidance schemes (Dotas) regime, introduced in 2004 to give the Revenue early warning, was allowing it to close legal loopholes more quickly, yielding additional revenue of between £225m and £650m a year. But some promoters did not disclose schemes in spite of penalties of up to £1m, normally because they would have obtained a legal opinion that the scheme did not meet the criteria for disclosure. The Revenue said it had "successfully challenged over 40 tax avoidance schemes through the courts in the last two years alone and successfully disrupted the avoidance industry through a combination of legal challenge and improved intelligence on new schemes. But as the avoidance landscape changes, so must [the organisation]. The government is building on Dotas to give HMRC stronger powers to obtain information. These, together with the introduction of an anti-abuse rule in 2013 will further strengthen our anti avoidance work.