The UK tax authority will collect £40m in unpaid taxed following its successful case against tax avoidance scheme promoter, Hyrax Resourcing.
Following the court battle, Hyrax must now disclose the details of its tax avoidance scheme to HMRC, along with the names and addresses of the 1,180 high earners who used it. If the scheme fails to comply, it could face a penalty of almost £6m.
Treasury financial secretary Mel Stride says: "HMRC is cracking down on the unscrupulous promoters who sell these highly contrived tax avoidance loan schemes.
Promoters need to take note of this decision and make sure they contact HMRC urgently about schemes they haven't yet disclosed"
"Promoters need to take note of this decision and make sure they contact HMRC urgently about schemes they haven't yet disclosed."
The Hyrax scheme saw UK-based earners quit their jobs and sign new contracts with UK trusts who would then "re-hire" their employee to their previous employers and take both their earnings and an 18%.
HMRC says the remaining 82% was "just enough salary each month" to comply with national minimum wage rules.
A statement from HMRC states: "The trustee transfers its rights to be repaid the loan to an offshore trust in Jersey - with the intention that the loans are never repaid.
"The amounts loaned are not included on the employees tax returns in an attempt to avoid paying Income Tax and National Insurance."
HMRC said the scheme was a successor to the K2 arrangements, the tax scandal, in which comedian Jimmy Carr was caught up.
The first-tier tax tribunal agreed with HMRC that Hyrax had failed to comply with rules regarding the Disclosure of Tax Avoidance Schemes procedure. This regulation, which has been in place since 2004, requires promoters of tax avoidance schemes to tell HMRC about the schemes they sell.
HMRC said it was currently pursing users of the K2 scheme through litigation. It said a number of K2-related appeals were currently listed with the tribunal but had not yet had a hearing. Users who do not settle with HMRC before April 5 will face the controversial loan charge. This measure forces those who were paid in loans from as far back as April 1999 to pay tax on all outstanding loans in a single tax year.