Who is likely to be affected
The measure will affect promoters and enablers of tax avoidance schemes.
The proposals supporting customers to identify and exit avoidance will benefit taxpayers.
General description of the measure
The measure is targeted at the most persistent and determined promoters and enablers of tax avoidance.
The proposed legislative changes are designed to clamp down on the supply of tax avoidance arrangements and include:
- a new power for HMRC to seek freezing orders that would prevent
promoters from dissipating or hiding their assets before paying the
penalties that are charged as a result of them breaching their
obligations under the anti-avoidance regimes
- new rules that would enable HMRC to make a UK entity, who
facilitates the promotion of tax avoidance by offshore promoters,
subject to a significant additional penalty
- a new power to enable HMRC to present winding-up petitions to the Court for companies operating against the public interest
- new legislation that would enable HMRC to name promoters, details
of the way they promote tax avoidance, and the schemes they promote, at
the earliest possible stage, to warn taxpayers of the risks and help
those already involved to get out of avoidance
Proposed revisions
The proposed changes would enable HMRC to seek a freezing order where
they are about to commence proceedings for a tribunal assessed penalty
under current anti-avoidance legislation. For instance, where HMRC are
about to make an application for a tribunal assessed DOTAS penalty.
The legislation would make it clear that this would satisfy the
requirement for an existing cause of action, allowing HMRC to use this
position to apply for a freezing order. HMRC would still need to show
that it was appropriate for a freezing order to be granted.
The conditions, all of which must apply, under which the additional penalty may be charged are that:
a) The UK entity falls within the definition of a member of a
‘promotion structure’ (as introduced in Schedule 30 Para 10 Finance Act
2021).
b) A penalty or penalties under anti-avoidance legislation becomes due
and payable on the UK entity in respect of their own activities.
c) The activities giving rise to the penalty or penalties under
anti-avoidance legislation were undertaken within an offshore promoter
structure.
d) The total value of the penalty or penalties under POTAS, DOTAS or DASVOIT legislation is equal to, or greater than, £100,000.00.
A penalty may also be charged where conditions a, b and c above are
met and the UK entity is subject to an Enablers penalty under Section 16
Finance (No.2) Act 2017. The £100,000 threshold in this instance is not
applicable.
The additional penalty for facilitating an offshore promoter’s
business would be for an amount up to the total fees or amounts
economically equivalent to fees earned by all those involved in the
development and sale of that tax avoidance scheme.
Where it was not possible to determine the value of those fees, a
best reasonable estimate would be used. There is also provision in the
draft legislation for the additional penalty to be increased or for a
new penalty assessment to be raised where further fees come to light at a
later date.
The proposed new power to be included in the Finance Bill will enable
HMRC to present a winding-up petition to the Court for companies who
are operating against the public interest whether there is a debt or
not.
The new HMRC power will mirror the approach that currently exists in
the Insolvency Act 1986 by using any information acquired in connection
with the Commissioners’ functions under section 5(1) of CRCA as a basis for considering winding-up action against a company.
Supporting taxpayers to identify, steer clear of and exit tax avoidance
This proposed power will allow HMRC to share information about
promoters of tax avoidance and tax avoidance schemes earlier than it
currently can or will be able to under the recently amended provisions
in Finance Act 2021.
The proposed power would enable HMRC to name a particular scheme, its
arrangements and how it is being made available to taxpayers or
administered, from when HMRC first learns about it. The power will
enable the naming of those associated with the entity carrying out the
promoting activity by means of control or influence as well as any
persons that carry out a role in selling the scheme to taxpayers.
The new power would also enable HMRC to publish any other information
or documents relating to the arrangement, entities or individuals which
HMRC reasonably believe will ensure that members of the public can
identify the arrangements and understand them and the risks which attach
to them.
The proposed changes would require HMRC to provide a 30-day period to
those entities or individuals after HMRC have given them notice that
they intend to name to allow them an opportunity to make representations
as to why they should not be named. A final decision on whether to
publish information would be made by an Authorised Officer.
A Data Protection Impact Assessment will be completed before the measures are implemented.
Tax does have to be taxing.
Tax Investigation Insurance
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if you are subject to enquiry by or dispute with HMRC.
A Solar Protect policy will enable your Accountant (your tax return agent) to:
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-
Attend any meeting with HMRC
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Appeal to the First-tier Tribunal or Upper Tribunal
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