Disclosure of Tax Avoidance Schemes (DOTAS)
Penalties for failure to comply with a DOTAS obligation without reasonable excuse are provided for in section 98C Taxes Management Act 1970, as amended by FA 2010.
DOTAS penalties fall into three categories:
- Disclosure penalties: apply to failure to disclose a scheme. There are variations in cases where a Tribunal has issued a disclosure order.
- Information penalties: apply to other failures to comply with DOTAS.
- User penalties: apply to failure by a scheme user to report a Scheme Reference Number (SRN) to HMRC.
In all cases apart from user penalties the initial penalty is determined by a Tribunal.
If a person does not have a reasonable excuse, the factors that are considered in deciding whether or not to institute penalty proceedings will include:
- The level of knowledge/experience the person could reasonably be expected to have of DOTAS;
- The person’s previous behaviour in relation to DOTAS;
- The adequacy of the systems the person has put in place to ensure compliance with DOTAS;
- The nature of the behaviour that led to the failure (e.g. was it isolated error, carelessness or a deliberate act);
- Whether the person alerted HMRC to the failure before being prompted;
- What the person did after the failure was discovered, or brought to their attention, to prevent any recurrence.
Appeals
There is a right of appeal against any penalty imposed by HMRC or determined by a Tribunal.
Penalty rates
|
Category |
Amount |
|
Disclosure penalties Cases where no disclosure order is involved
|
An amount not exceeding £600 a day during the “initial period”.
|
|
Cases where no disclosure made within 10 days of a section 314A order |
Both the maximum initial daily penalty and the secondary daily penalty increase to £5,000 for each day |
|
Information penalties |
An initial penalty of an amount not exceeding £5,000. HMRC may impose a daily penalty, not exceeding £600, for each day that the failure to provide information continues after an initial penalty has been determined. The maximum daily penalty increases to £5000 per day after an order under sections 306A or 314A.
|
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The user penalty |
A scheme user who fails to comply with a section 313 obligation to report a SRN and related information is liable to a penalty of:
£100 per scheme (i.e. each scheme to which the failure relates) for a first occasion;
£500 per scheme on the second occasion within 3 years (whether or not it relates to the same scheme involved in the previous occasion); and
£1,000 per scheme on the third and subsequent occasions (whether or not the failure relates to schemes involved in a previous occasion).
|
Failures involving both NICs and Income tax
No disclosure penalty will be charged for a failure to disclose a NI contribution arrangement if the arrangement, or substantially the same arrangement, is also a disclosable income tax arrangement and a penalty has been imposed for failing to disclose that arrangement.
The same principle applies in relation to information and user penalties.
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