Tackling promoters of Tax avoidance schemes
25 July 2020
The consultation will run until 15 September and details the government proposals to strengthen the sanctions against those who promote or enable tax avoidance schemes and makes changes to the following anti-avoidance regimes that includes:
- Disclosure of Tax Avoidance Schemes (DOTAS) and Disclosure of Avoidance Schemes: VAT and other indirect taxes (DASVOIT), under which promoters of schemes have to give HMRC certain information about both their schemes and their clients.
The key proposal here is for changes to DOTAS to require information to be provided at an earlier stage. The proposed changes are an important component of this package of proposals for tackling promoters of tax avoidance.
The concept of being named is also being considered within the paper.
- Promoters of Tax Avoidance Schemes (POTAS), which enables HMRC to monitor the activities of those who repeatedly sell schemes which fail, and to make it hard for them to do so.
The proposals would see the responsibility for the obligations within POTAS, and for any failure to comply with them, placed on the people behind the design of the scheme and would be achieved by widening the existing legislation to include individuals who control, or significantly influence, entities that carry on promotion activities, as well as the people they work through in the UK, and other entities that have been set up in a fragmented way to frustrate HMRC’s ability to tackle them.
- Enablers of Tax Avoidance, which allows HMRC to take action against those engaged in design and sale of abusive tax arrangements.
A range of changes are proposed to address many of the issues relating to existing legislation, the aim being to ensure that HMRC can obtain relevant information at an earlier stage. The proposed changes would also enable HMRC to assess penalties at an earlier point when a multi-user scheme was shown not to work.
- The General Anti-Abuse Rule (GAAR), which enables HMRC to take action in relation to both the promotion and use of abusive tax arrangements. This document deals in particular with the application of the GAAR to partnerships.
Changes to the GAAR procedure would ensure that all circumstances are catered for and reduce the risk of promoters looking to take advantage of any ambiguities in the current GAAR legislation.
A separate consultation aimed at tackling disguised remuneration schemes has also been published as well as a Call for Evidence, currently running on the subject of raising standards in the tax advice market.
As the tax avoidance market has moved away from bespoke avoidance schemes designed for the wealthy and towards mass-marketed schemes HMRC have an increasingly important role to play in informing taxpayers, in order to reduce the risk that they enter into schemes without necessarily understanding the repercussions.
A key part of tackling this problem is to address it at source and act swiftly and directly against promoters, which is what the measures in this consultation aim to do.
Promoters rarely tell their clients that the product they are offering is an avoidance scheme, and they do not explain the risks of entering the schemes they sell. Instead, promoters may promise implausibly low tax bills and give assurances that their arrangements cannot be successfully challenged by HMRC. However, individual taxpayers are legally responsible for getting their tax right and will eventually need to pay the additional tax they owe, often having already paid out substantial fees to the promoters they used.
To understand the full details of the proposals read the consultation paper which can be downloaded at gov.uk.
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