HMRC have produced another set of Press Releases, this time the majority being on the subject of avoidance.
Tax avoidance enablers to face tough new penalties – HMRC have issued a consultation document which proposes that accountants, tax planners and advisers who provide advice on how to avoid tax will face tough penalties.Currently tax avoiders face significant financial costs when HMRC defeats them in court. However, those who advised on, or facilitated, the avoidance bear little risk. The government is acting to make sure that tax avoidance is rooted out at source and this action will target all those in the supply chain of tax avoidance arrangements.
Under the plans set out in an HMRC consultation document, enablers of tax avoidance could have to pay a fine of up to 100 per cent of the tax the scheme’s user underpaid.
The Financial Secretary to the Treasury, Jane Ellison said:
People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay. The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs. These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.The consultation document also clarifies the rules around whether proven tax avoiders have taken reasonable care to ensure their tax returns do not contain inaccuracies, making it simpler to enforce penalties when avoidance schemes are defeated.
This is the latest of a number of government measures designed to tackle illicit finance and tax dodging. These include a new criminal offence for corporations that fail to prevent the facilitation of tax evasion, and new sanctions against those who engage in multiple avoidance schemes which are defeated by
The consultation, which closes on 12 October, can be found here.
Learn Comment
This document has to be seen as part of the government’s intention to reduce the money lost to the Treasury through tax and NI avoidance schemes. The intention is to attack those promoting schemes in addition to those making use of such schemes, in other words penalties on both the users and promoters.
The impression we have is that, whilst salary sacrifice schemes for such benefits as child care vouchers, pensions and cycle to work schemes will remain safe, the government would like to see the back of the majority of other schemes.
Compliance checks: tax avoidance schemes – HMRC has produced a FactSheet for those who have been sent a “follower notice”.That begs the question, who or what are “followers”?
When HMRC has a large number of very similar avoidance cases, they often investigate ‘representative cases’; taking them to litigation if necessary. If the court or tribunal finds that the scheme doesn’t achieve the tax or NICs advantage in those cases, the disputes in those cases are settled. HMRC can then recover the tax and/or NICs due.
‘Followers’ are people who have used:
the same scheme that was used in a representative case, ora different scheme but where a principle in that scheme is sufficiently similar to the scheme used in a representative caseBefore the legislation was introduced on 17 July 2014, there was little incentive for ‘followers’ to accept that the court or tribunal’s findings in a representative case. This meant that HMRC had to take separate action against the organisations using those schemes.
HMRC issue the factsheet because the recipient has been identified as having used a tax avoidance scheme, and to advise them that they will soon be hearing from HMRC about:
taking corrective action to avoid a penaltymaking a payment of the amount that relates to the use of the schemeIt tells the follower that they’ll be liable to pay a penalty if they don’t settle their dispute with HMRC. The amount of the penalty for not taking corrective action on time is equal to 50% of the tax or NICs in dispute (referred to as the ‘denied advantage’ in the follower notice).
The penalty can be reduced if the employer co-operates with HMRC before a notice of penalty assessment has been issued. Co-operation includes:
providing HMRC with reasonable help in working out the amount of the tax advantagecounteracting the denied advantage (this will be described as ‘relinquishing’ the denied advantage if:The follower notice relates to an appeal)giving HMRC information that enables them to take corrective actiongiving HMRC information that enables them to enter into an agreement with the employer to counteract the denied advantagegiving HMRC access to tax records so that they can make sure that the denied advantage is fully counteractiveIt is worthwhile noting that the penalty percentage cannot be reduced below 10%.
