Among the measures the Revenue hopes to introduce in its battle to curtail tax avoidance – as opposed to tax evasion – is the identifying of "high-risk promoters of avoidance schemes", in part by forcing such promoters to provide details of their products to the Revenue, as well as the introduction of "significant new penalties" for those who fail to comply with the rules.
In an introduction to the 42-page consultation document, which is entitled "Raising the Stakes on Tax Avoidance", exchequer secretary to the Treasury David Gauke said the stakes have "never before…been raised so high and the disincentives to market and participate in avoidance so strong".
The package of measures follows on from earlier HMRC efforts, which have included the introduction of a General Anti-Avoidance Rule (GAAR), which took effect in July, and an earlier consultation entitled "Lifting the Lid on Tax Avoidance Schemes".
Initial industry reaction was subdued, possibly because HMRC announcements of efforts to crack down on tax evaders and avoiders have become relatively common.
Gerry Brown, technical manager at Prudential, said it was important to remember that most of the inheritance tax planning/avoidance schemes used by mainstream tax advisers, such as loan trusts, discounted gift trusts, excluded property trusts and so on, were not the focus of this consultation, and would be unaffected by the measures being proposed.
He predicted that the fact that HMRC says it is planning to fine scheme promoters in certain circumstances is likely, by itself, to "cut down the number of ‘potentially abusive’ schemes on the market".
The Chartered Institute of Taxation (CIOT) said it welcomed HMRC’s latest proposals, with its president, Stephen Coleclough, noting that members of the public who become end users of high risk avoidance schemes "are sometimes misled by the promoters" of such schemes, and thus are often not fully aware of the risks or consequences of their decisions, and would therefore benefit from having such schemes identified.
"The CIOT has previously raised concerns about promoters of schemes whose conduct could amount to misselling," he added.
"We are pleased that the Government are continuing to explore whether more can be done in this area.
“It is important that HMRC’s resources are targeted at those who promote and take advantage of abusive schemes, rather than creating bureaucratic procedures that will make life harder for mainstream tax advisers and their clients. The Government rightly acknowledge this in the consultation document."
The CIOT was also pleased to note, he said, that the Government recognised the importance of tax advisers to the administration of the UK’s tax system.
Ray McCann, partner at the international law firm Pinsent Masons, said that although there has been "much public disquiet about the activities of ‘boutique’ tax promoters" the latest proposals "smack of HMRC shutting the stable door after the horse has bolted, especially coming so soon after the General Anti-Abuse rule has become law".
“The real task facing HMRC is to clear up the large backlog of tax avoidance schemes, some of which go back ten or more years," he added.
"HMRC accepts that current levels of tax avoidance activity are significantly down, and that’s why we have been pressing HMRC to look for more radical ways to tackle the backlog.”
The closing date for comments is 4 October. HMRC is estimated to lose as much as £5bn each year to tax avoidance.
To read and download a copy of the consultation document, click here.
