HMRC have launched a consultation ‘Tougher consequences for promoters of tax avoidance’. It seeks views on proposals for a new criminal offence for promoters of tax avoidance who fail to comply with HMRC stop notices, and to expedite the disqualification of directors who promote tax avoidance.
The consultation builds on HMRC’s promoter strategy announced in 2020, the changes to existing anti-avoidance regimes introduced in Finance Act 2021 and new measures to clamp down on promoters of tax avoidance introduced in Finance Act 2022. It proposes two new measures:
- A criminal offence for promoters who fail to comply with a Stop Notice from HMRC under the Promoters of Tax Avoidance Schemes (POTAS) rules and continue to promote and sell the scheme covered by the notice.
- Stop notices are legally enforceable notices with penalties applying for failure to comply starting at £5,000 up to £1m.
- Under the new proposals failure to comply could also result in a strict liability criminal offence allowing HMRC, should they choose to do so, to open a criminal investigation which could lead to custodial sentences. This would sit alongside the current civil penalty regime rather than replace it.
- Allowing HMRC to initiate director disqualification court proceedings against promoters of tax avoidance without first having to refer it to the Insolvency Service (INSS), in the following circumstances:
- Disqualification following a winding-up of a company in the public interest.
- Disqualification of a director of a ‘live’ company, i.e. a company not in formal insolvency proceedings.
HMRC would still have to produce evidence for the court, as they currently do for the INSS, but the proposed changes would reduce the number of steps required and speed up the disqualification process in these specific circumstances.
- The consultation also asks whether the current sanctions for breaching disqualification are sufficient where the disqualification is tax avoidance related.
The consultation closes on 22 June 2023. Responses should be sent to
Consultation questions
1. Do you agree that focusing a criminal offence on the continued promotion of a scheme covered by a Stop Notice will help to deter promoters?
2. Do you agree that the twofold approach of civil penalties and criminal offence will provide a comprehensive deterrent for promoters?
3. In the circumstances set out in the example provided, as Mr A is significantly influencing the continued promotion activity, do you agree that Mr A is in the scope of the criminal offence?
4. Do you agree that these other obligations, where they do not relate to continued promotion, should not be subject to criminal offence?
5. Do you agree that these safeguards provide the right level of protection for those who may face potential criminal prosecution?
6. Do you agree that allowing HMRC to consider and bring disqualification proceedings against directors and those who control or exercise influence over a company involved in promoting tax avoidance will help deter and tackle tax avoidance?
7. What other factors should HMRC take into account when considering a director disqualification?
8. Do you have any suggestions for ensuring these proposals deal effectively with those who directly or indirectly control or exercise influence over a company, for example, shadow directors?
9. Should undertakings form part of HMRC’s approach to director disqualification?
10. Do you consider the current sanctions for breaching a disqualification or undertaking are sufficient for tax avoidance-related disqualifications?
11. Do you consider the current safeguards outlined above are sufficient and provide adequate protections for directors? If not, what additional safeguards could be introduced?
Useful guides on this topic
Promoters of Tax Avoidance Schemes (POTAS)
Who is a Promoter? What are the Promoters of Tax Avoidance Scheme rules? What does this mean for promoters, intermediaries and clients?
DOTAS: Disclosure of Tax Avoidance Schemes
What are the Disclosure of Tax Avoidance Schemes (DOTAS) rules? When should you disclose your use of a tax avoidance scheme? What are the consequences of non-disclosure? How are penalties calculated?
External link
Consultation: Tougher consequences for promoters of tax avoidance
Are you enjoying our content?
Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.
Register with us now to receive our receive our FREE SME Topical Tax Update & newletter.
