Criminal sanctions warranted for promoters of tax avoidance

HMRC have published the outcome of the consultation, 'Closing in on promoters of marketed tax avoidance — summary of responses'. The primary conclusion was that there is a case for introducing a criminal offence for non-compliance with DOTAS obligations.

Hand shake

 

Overview

The consultation ‘Closing in on Promoters of Marketed Tax Avoidance’ was launched on 26 March 2025 and closed on 18 June 2025. This sought views on a package of measures to strengthen the regimes that target promoters of marketed tax avoidance schemes and received 35 written responses.

It was a lengthy and detailed report, but the government believes that introducing a criminal offence for failure to disclose arrangements under DOTAS will further deter promoters and proposes that the new offence should have a maximum sentence of an unlimited fine and up to two years imprisonment, or both.

The consultation focused on four areas and sought views on areas the government intended to explore in the future:

  • Expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
  • Introducing a Universal Stop Notice (USN) and Promoter Action Notice (PAN).
  • Tackling controlling minds and those behind the promotion of avoidance schemes through new targeted obligations and stronger information powers.
  • Exploring options to tackle legal professionals designing or contributing to the promotion of avoidance schemes.

Any changes to law and raising standards in the tax advice market would also be influenced by other separately published technical consultations on modernising and mandating tax adviser registration and enhancing HMRC’s powers to tackle tax advisers facilitating non-compliance.

Government response

Expanding and strengthening the DOTAS regime

The government accepts that a persistent and determined group of promoters seek to exploit every opportunity to harm the tax system by selling tax avoidance schemes they claim sidestep the rules and must be stopped.

The consultation proposed three changes to the DOTAS regime:

  • A criminal offence for failure to notify arrangements under Disclosure of Tax Avoidance Schemes (DOTAS).
  • A new hallmark to more clearly target disguised remuneration schemes.
  • Updating the DOTAS civil penalty regime so that HMRC may directly issue DOTAS penalties. This would bring DOTAS penalties in line with the changes made to allow HMRC to allocate a scheme reference number under DOTAS without Tribunal approval and with penalties issued under the Promoters of Tax Avoidance Schemes (POTAS) regime.

DOTAS hallmarks

The government noted that disguised remuneration schemes are already covered by existing hallmarks, or existing hallmarks could be amended. 

The government will keep the DOTAS regime under review, including the hallmarks, to ensure the continued effectiveness of the regime.

Criminal offence for failure to notify arrangements under DOTAS

The government believes that introducing a criminal offence for failure to disclose arrangements under DOTAS will help further deter promoters and provide alternative ways for HMRC to tackle non-compliance with DOTAS.

  • The government proposes that the new offence should have a maximum sentence of an unlimited fine and up to two years imprisonment, or both.
  • Any promoter whose inadvertent failure is reasonable (rather than culpable) would have the opportunity to explain this early in the course of any criminal investigation, which could then be promptly closed and discontinued if appropriate.
  • The decision to open a criminal investigation would be made in line with HMRC’s existing criminal investigation policy.
    • Ultimately, HMRC would have to prove its case in Court to secure a criminal conviction.
  • This offence should be targeted towards promoters of avoidance.
  • The government believes that it is also appropriate to introduce a criminal offence that applies to promoters of avoidance relating to VAT and other indirect taxes.

Updating the DOTAS civil penalty regime

It was proposed that HMRC should determine civil penalties under the DOTAS regime. The government wants to move forward with this proposal, including the right of appeal to the Tribunal.

  • This change would bring DOTAS penalties in line with other anti-avoidance regimes and allow HMRC to issue penalties for DOTAS failures faster.
  • The Disclosure of Tax Avoidance Schemes: VAT and other Indirect Taxes (DASVOIT) regime would be amended to allow HMRC to determine penalties in line with the change proposed for DOTAS.

Universal Stop Notices and Promoter Action Notices

The consultation document proposed the introduction of a Universal Stop Notice (USN). Stop notices issued under the current legislation apply only to those promoters and schemes specified in each notice. The USN measure proposes to issue a USN that would apply to all promoters and their arrangements that match the description specified.

Proportionality

The government was content that the proposals for the USN measure would be a suitable deterrent to promoters of tax avoidance.

  • There would be suitable governance and guidance to ensure the measures are targeted on promoters.
    • USNs are aimed at criminalising the promotion of the arrangements and this is distinct from criminalising taxpayers choosing to take a position that differs from HMRC’s interpretation of the law concerning their own affairs.

Targeting and scope

 The government proposes the following to ensure that the USN measure is appropriately targeted:

  • Legislation will set out the definition of activities such as promoting, marketing, designing, etc, so these can be linked to the description of the relevant schemes within the USN.
    • Anyone undertaking these activities would be in breach of a USN. 
  • USNs will be made by regulations.

Awareness of Universal Stop Notices

The government intends to issue USNs under regulations set out in secondary legislation.

  • USNs will be available for all to view on legislation.gov.uk accompanied by press releases, social media announcements and alerts to relevant representatives and trade bodies.
  • The government says there should be a reasonable expectation that professionals should keep up to date with new and existing powers and notifications.

Reasonable excuse

The government recognises the need for a reasonable excuse defence in this offence.

  • It proposes that there should not be a statutory definition of what is a reasonable excuse, to allow the courts to consider the matter in light of all the circumstances of a particular case.
  • The draft legislation will, however, set out a list of reasons that would not be considered to be a reasonable excuse for failing to comply with a USN.

Safeguards

The government agrees that there should be appropriate and proportionate safeguards.

  • USNs will now be issued via regulations and an Authorised Officer will look at all the relevant information.
    • They will contact the promoter to notify them of that breach.
    • They will decide on the appropriate sanction, and will consider representations by the promoter.
  • HMRC will have a number of safeguards for promoters.
    • There will be the opportunity to appeal to the tax tribunal against civil penalties and the measure will include standard criminal offence safeguards.
  • Criminal prosecutions for USN failures would be reserved for serious cases of non-compliance, where HMRC needs to send a strong deterrent message, or where civil penalties would be ineffective.
  • Any criminal investigation would be subject to HMRC’s governance and oversight for criminal investigations.
  • The decision to prosecute would lie with the relevant prosecuting authorities.
  • HMRC will be able to update or withdraw USNs by amending regulations in specific circumstances.

Sanctions

The government recognises the importance of having a range of sanctions that are both proportionate and appropriate.

  • The sanctions that will be used with the USN regime will include:
    • Publication of the details of the person who has breached the USN civil financial penalties and a criminal offence.
    • Publication will mirror the current publishing provisions in section 86 of Finance Act 2022, penalties will be largely based on the current Stop Notice regime set out in Schedule 35 to Finance Act 2014 and the criminal offence will mirror the current provisions in the Promoters of Tax Avoidance (POTAS) legislation in section 277A of Finance Act 2014.

Promoter Action Notice

Proportionality

As with the proposal for the USN, the government believes that the PAN proposal will act as a suitably proportionate deterrent in consideration of the costs of compliance.

  • The government recognises that the proposal may cause businesses to face an additional administrative burden when HMRC take action.
  • The government will work with industry to ensure the PAN proposal complements existing rules and laws, including existing safeguards.

Application

The government is content that specific products or services do not need to be excluded as the requirement for products or services to be demonstrably ‘connected to the promotion of avoidance’ will act to prevent the proposal being misused.

  • Where legal advice has been provided, this will be out of scope of the PAN measure.
  • HMRC must demonstrate that products or services are ‘connected to the promotion of avoidance’ and to provide details of the action required of a product or service provider, all of which will ensure appropriate targeting of a PAN.
  • It is the government’s view that linking the issuing of a PAN to the breach of a Stop Notice or a USN will provide reassurances to business that HMRC has fully considered the activities.
  • A business will be able to appeal to the tax tribunal against the issuing of a PAN.

Practical concerns

The government recognises concerns from respondents that the PAN would be an additional administrative burden for a compliant business. 

  • The government is keen, where possible and appropriate, to use and build on existing frameworks and processes to minimise any impacts on the business.
  • The government will continue to consult further across sectors to clearly establish how the PAN will interact with other areas of law, for example, anti-money laundering requirements, or intermediary liability protections.
  • It is the government’s policy intent that a business should not be liable for complying with a notice issued by HMRC should that notice later be judged invalid.
  • The government recognises that there may be commercial implications for the business in receiving a PAN. The government is also exploring mechanisms to permit payments or acts that would otherwise breach the PAN to mitigate the impact on third parties, similar to the exclusion for living or business expenses in Proceeds of Crime Act cases.
  • The government understands the concern about adverse public comment around ‘debanking’.
    • Where there is a formal PAN in place, there would be a legal requirement to take action against a customer, for example, the removal of services, which would enable a bank to point to that legal obligation.

Safeguards

The government agrees that the PAN should have effective and proportionate safeguards for PAN recipients, especially since receipt of a PAN would not be an indication of wrongdoing.

  • The proposed PAN legislation will include information-sharing provisions which would allow HMRC to exchange and share information with businesses and vice versa, without businesses breaching data protection laws and without requiring HMRC to use formal information powers.
  • The government does not think that tribunal approval should be necessary for the issue of a PAN.
  • An Authorised Officer will be responsible for the key decisions relating to a PAN.
  • Any sanctions following failure to comply with a PAN will not be finalised until any outstanding appeal has been determined.
  • The government agrees that extensions to the pre-PAN period may be necessary to allow businesses to act.
  • There may be circumstances, for example, a decision by the tax tribunal, where a PAN will need to be withdrawn or amended, or both.
  • There would be no statutory definition of what is a reasonable excuse in relation to the proposed criminal offence for failure to comply with a PAN.
  • The draft legislation will, however, set out a list of reasons which would not be considered to be a reasonable excuse for failing to comply with a PAN.

Sanctions

The government’s view is that the use of sanctions is important and effective and needs to be proportionate and appropriate.

  • The government has considered the proportionality of introducing a criminal offence for failure to comply with a PAN and does not believe that it would be suitable in consideration of sanctions for other obligations on businesses.
  • The government believes tax-geared penalties would be difficult to calculate and would not be proportionate in these circumstances.
  • The government is considering a ‘fixed’ or ‘up to’ penalty regime and has been exploring what factors may help in determining the quantum.
  • The government will introduce a new reporting power which seeks to report failures to comply with a PAN to the business’s appropriate representative body and/or regulator.
  • The government considers the existence of the pre-PAN step will help businesses inform HMRC of likely practical challenges to implementing a formal PAN and enable them to work through reasonable timescales with HMRC. 
  • The government recognises the need to uphold the intermediary liability principle and will continue to work with industry and experts to explore the most appropriate way for PAN liability to apply to intermediaries to ensure appropriate protections and alignment across obligations. 

Stronger information powers to effectively investigate those who own and control promoter organisations

Connected Parties Information Notice (CPIN)

The government agrees that CPIN’s scope should be appropriately targeted while being wide enough to cover persons connected to the promotion who may hold information relevant to HMRC’s anti-avoidance investigations.

  • The intention is that the definition of a ‘connected person’ would be based on the well-established definition under section 86 of Finance Act 2022.
  • The government’s position is that issuing a CPIN should be based on a reasonable suspicion that a party is a ‘connected person’.
  • The government recognises that persons in the promoter chain may attempt to sidestep CPIN requests by claiming that a document is subject to legal professional privilege where there is no good reason to do so. The government intends to mirror the existing approach to Legal Professional Privilege (LPP) dispute resolution under Schedule 36 Finance Act 2008.
  • The government’s view is that where a person fails to comply with a CPIN without a reasonable excuse, destroys or conceals documents or misleads HMRC, a criminal sanction should be a possible consequence.
  • Criminal prosecutions for CPIN failures would be reserved for serious cases of non-compliance, where HMRC needs to send a strong deterrent message, or where civil penalties would be ineffective. 
  • The government recognises that addressing offshore promoters is a challenge.
  • The government’s view is that HMRC should have the option of issuing notices with or without tribunal approval based on the specific circumstances of a case. This would be balanced by safeguards that would mirror those in Schedule 36 Finance Act 2008.
  • The government proposes that there would be no statutory definition of what is a reasonable excuse. 

Promoter Financial Institution Notice (PFIN)

The government initially proposed safeguards in line with the current process for FINs, introduced in Finance Act 2021. The government now proposes that HMRC should require tribunal approval to issue a PFIN.

  • The government now proposes an extra layer of Tribunal oversight to allay concerns, with HMRC only able to issue PFINs with Tribunal approval. 
  • The government recognises that it could apply an additional safeguard for taxpayers here without unduly slowing down HMRC action against promoters, and parties connected to the promotion of avoidance, in the vast majority of cases. 
  • The government agrees with the suggestion that the current definition of FIs should be used. The definition of FIs is changing from 1 January 2026 to include entities that hold Specified Electronic Money Products or Central Bank Digital Currencies for the benefit of customers. 

Legal professionals

Disclosure of avoidance scheme by legal professionals who promote tax avoidance schemes

The government no longer proposes to pursue the repeal of Regulation 6, part of DOTAS. The government agrees with points raised in response to the consultation that the changes would bring few additional legal professionals within DOTAS, given that many legal professionals are already within the scope of DOTAS under other sections.

The government considers that other measures in this package and ongoing engagement with the legal sector will ensure that legal professionals are suitably held to account where they do not operate within the usual bounds of providing legal advice.

Publishing the names of legal professionals who design tax avoidance schemes

HMRC already has powers to publish details of legal professionals involved in tax avoidance schemes under certain circumstances.

  • While some concerns have been raised, the government considers that the role of publication is one of education and of protecting the public revenue.
  • It is therefore appropriate that the names of legal professionals can be shared with the public, even where these individuals provide all their input into tax avoidance in contexts covered by LPP, provided other conditions are met.
  • This measure will essentially target legal professionals who give design advice, under LPP, but are not otherwise involved in the proposals/arrangements. Other legal professionals should be within the scope of existing publishing powers.
  • To provide additional protections for legal professionals where their details are potentially going to be published, where LPP prevents them from making representations in the usual manner, the government proposes to draw on the legislation in relation to Enablers of Defeated Avoidance Schemes at para 44 schedule16 Finance (No2) Act 2017.
  • A declaration would ensure that a legal professional could provide a statement, generally to be taken as fact, that their involvement did not extend beyond certain parameters.
  • The government intends to include penalties and/or publication for carelessly or deliberately inaccurate declarations, to aim to prevent their misuse. 

An LPP waiver in respect of promoters who utilise legal opinions to market schemes

After further consideration of this proposal and responses, and reflecting on the legal and practical implications of implementing it, the government no longer intends to pursue this proposal at this time.

Making clear HMRC’s position on when LPP does not apply

The government is committed to using the powers that already exist, and those that it recommends building on following this consultation, to tackle legal professionals involved in the promotion of tax avoidance. 

The government intends to build on current guidance in relation to LPP.

 LPP to help educate the public about where it may apply in relation to tax avoidance, but recognises the limits of HMRC’s remit in this area.

Useful guides on this topic

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?

Anti-avoidance: HMRC's spotlights
This is a freeview 'At a glance' guide to HMRC's Spotlights.

Professional Conduct in Relation to Taxation
The Professional Conduct in Relation to Taxation (PCRT), adopted by the main professional accounting and tax bodies, sets out the professional standards that are expected of a member when undertaking tax work.

Named tax avoidance schemes, promoters, enablers
HMRC publish a list of named tax avoidance schemes, promoters, enablers and suppliers. It is not recommended that taxpayers use any of these schemes, as HMRC do not consider that they work and you may end up with a significant tax liability if you engage with the scheme suppliers.

External link

Consultation outcome: Closing in on promoters of marketed tax avoidance — summary of response