Those who continue to promote tax avoidance after receiving a ‘stop notice’ issued by HM Revenue and Customs will be liable for a criminal offence under new rules proposed by the government.
In a consultation paper released last week (April 27), the government said clamping down on promoters is one part of its strategy to tackle the problem of marketed tax avoidance.
The amount of revenue lost as a result of this has reduced from £1.5bn in the 2005 to 2006 tax year to £400mn in the 2020-21 tax year, however the government said it is continuing to take action to deter, disrupt and “otherwise frustrate” promoters of tax avoidance.
“These proposals do not target legitimate tax advisers and taxpayers,” said Victoria Atkins, financial secretary to the Treasury.
“They are instead targeted at a determined group of promoters who profit by attempting to sidestep the rules often leaving taxpayers with significant tax bills.”
The government said there are around 20 to 30 active promoter organisations, some based offshore and hiding behind complex corporate structures.
Moreover, it added, most of the tax avoidance schemes they promote “do not work”, and the taxpayers who enter them often end up paying large sums of money in tax bills for the tax they always owed, as well as having already paid the “substantial” fees to scheme promoters or other intermediaries.
The suggested rules will mean that those who receive a stop notice, which HMRC issues to a promoter telling them to stop selling a scheme, and continue to sell the scheme would be committing a criminal offence.
“The message for promoters is a clear one: under these proposals if a promoter continues to promote a scheme covered by a stop notice they will be committing a criminal offence and could face prosecution,” the government said.
The new rules proposed also include speeding up HMRC’s ability to disqualify directors who promote tax avoidance schemes.
The rules would give HMRC the powers to disqualify directors following a winding-up of the company in the public interest, as well as disqualifying a director of a ‘live’ company.
In the consultation, the government said currently there are a number of factors which can delay disqualification action being taken against the directors of a company involved in promoting tax avoidance, including the need to consider wider factors around the behaviour of the director, for example the failure to keep proper accounting records.
“This means that it is often difficult to apply [the rules] quickly to promoters of tax avoidance, even when it is important that HMRC can respond quickly to their activities because the longer the process takes, the longer the person behind the promotion has to sell avoidance schemes.”
Currently, HMRC must refer to the Insolvency Service for any potential director disqualification action.
Crawford Temple, chief executive of Professional Passport, said while HMRC and the government are full of good intentions to clamp down on avoidance, opening another consultation delays action and enforcement.
