HMRC has initiated a campaign contacting PRS media to ‘flag’ its new guidance for landlords over a tax evasion scheme.

The heavily marketed scheme aimed at landlords is ‘plugged’ as a tax planning opportunity for sole property landlords to financially structure their business and is at times called a ‘hybrid’ business model.

The Revenue contends that the scheme tries to avoid mortgage interest relief restrictions and allows increased deductions for mortgage interest, reduce Capital Gains Tax payable upon selling properties, pay less tax on the businesses’ profits and cut payable Inheritance Tax upon death.

HMRC says in the guidance: “HMRC’s view is that this scheme does not work. People who use these arrangements may have to pay more than the tax they tried to avoid as well as paying interest, penalties and high fees for using such schemes.”

The detailed guide explains exactly how the arrangement/scheme claims to work by setting up a limited company alongside an LLP (Limited Liability Partnership).

However the Revenue warns landlords that the scheme is doomed to fail as the arrangements are in the main caught out by other tax regulations which are featured in the guidance.

The Revenue sends a message to landlords saying if anyone in this type of arrangement wishes to get out then they should contact HMRC for help and states: “If you’re using this or similar schemes or arrangements, HMRC strongly advises you to withdraw from it and settle your tax affairs.”