HM Revenue and Customs (HMRC) wants to tackle the promotion of tax avoidance schemes in a bid to reduce opportunity in the market.
It published a consultation paper on 21 July called ‘Tackling promoters of tax avoidance’ and seeks views on proposals to strengthen the sanctions against those who promote or enable tax avoidance arrangements.
The UK taxman wants to make changes to the following anti-avoidance regimes:
- Disclosure of Tax Avoidance Schemes (Dota);
- Promoters of Tax Avoidance Schemes (Potas);
- Penalties for Enablers of Defeated Tax Avoidance;
- General Anti Abuse Rule (Gaar); and
- Disclosure of Avoidance Schemes: VAT and other indirect taxes (Dasvoit).
The government wants views from members of the public, representative bodies, advisers and promoters, as well as businesses and individuals who may have received marketing material, taken advice about, or used arrangements which seek to avoid tax.
HMRC said: “Many tax advisers adhere to high professional standards and are a very useful source of advice and support to taxpayers.
“The changes in this document are not aimed at such professionals.”
Proposal
Currently, tax advisers are excluded from HMRC’s powers to inspect a person’s position regarding a potential penalty and to collect information to help identify any other person who enabled the tax avoidance arrangements.
But the UK tax collector is proposing to remove the exclusion, meaning advisers could be required to provide information regarding people involved in an ongoing tax avoidance investigation.
Advisers would still be able to withhold any details they think is not required for HMRC’s investigation.
HMRC said: “The proposals are designed to strengthen the existing anti-avoidance regimes, which provide a mechanism for ensuring there is transparency for taxpayers and others around avoidance schemes, and to change the behaviours of those involved in promoting and enabling schemes.”
Stop notices
Also in the consultation, HMRC said it wants to issue stop notices at an earlier stage as soon as it has reasonable suspicion that there is a scheme that does not work.
A stop notice would be sent to the promoter, who would also be informed that the UK taxman is considering a Potas conduct notice, if they do not comply with the stop notice.
HMRC said that “it would be able to act promptly”, which means “that the scheme would stop being sold at earlier point in time, which would mean that there are fewer taxpayers drawn into schemes that do not work”.
A person subject to a stop notice can make a request to HMRC for the notice to not take effect.
But this is only if they will discontinue promotion of the scheme in question or if they argue that the arrangements specified in the notice do not meet the criteria for issuing a stop notice.
The person can appeal to a tribunal if the request for the stop notice to be scrapped has been refused by HMRC.
Recent activity
The changes proposed by HMRC were first announced in December 2019 as part of the government’s response to Sir Amyas Morse’s independent review of the loan charge.
In that response, the government announced that it would take further measures to tackle promoters of tax avoidance schemes that would reduce the scope for promoters to market tax avoidance schemes.
In the Budget 2020, the UK government announced that these measures would be taken forward in the Finance Bill 20/21.
These proposals were also described in the ‘promoter strategy’ published by HMRC in March 2020.
After the consultation
The consultation runs from 21 July 2020 to 15 September 2020.
The responses to the consultation will be considered alongside the responses to the draft legislation that was published on 21 July.
“The government will consider those responses in readiness for the Finance Bill that is published later this year,” HMRC said. “A summary of responses will also be published later this year.”
