More pain for the serial tax avoider – if there are any around
HMRC’s anti avoidance machine, (monster is perhaps a better word), has rolled out yet another ‘crack down’ on the vanishing breed of tax avoider. This one is about ‘serial tax avoidance’ legislation.
How it all works
The new serial tax avoidance legislation applies to schemes entered into on or after 6 April 2017.
HMRC say that the legislation applies to:
- ‘partnership that you’re a member of
- company within your group of companies
- person who is an associate of yours.’
For the serial tax avoidance legislation, a tax avoidance scheme is one of the following:
- arrangements that are disclosable under the Disclosure of Tax Avoidance Schemes (DOTAS) legislation
- a scheme that is disclosable, or has been disclosed, under the VAT Avoidance Disclosure Regime (VADR) legislation
- tax arrangements for which we’ve given you a follower notice
- tax arrangements where we’ve given you a notice of final decision, telling you that the tax advantages arising from the scheme are to be counteracted under the General Anti-Abuse Rule (GAAR)’.
The warning period
HMRC go on to say:
‘Once we’ve defeated a tax avoidance scheme that you’ve used, we’ll give you a warning notice. That warning notice will remain in place for 5 years. This period is known as the ‘warning period’. During a warning period, you’ll have to give us detailed information about any tax avoidance schemes you’ve used during that period.
If you’re already in a warning period and we give you another warning notice, then we’ll extend your warning period by up to a further 5 years.’
Sanctions
If HMRC ‘defeat’ a tax avoidance scheme then sanctions may be imposed.
‘During the warning period you’ll have to send us the following each year:
- details of any tax avoidance scheme that you’ve used during that year, and which is disclosable under DOTAS
- details of any tax avoidance scheme that you’ve used during that year which is disclosable, or has been disclosed, under VADR
- explanations of why you think the scheme or schemes you’ve used achieve the intended tax advantage, or avoid an obligation in relation to tax that you would otherwise have
- details of how much tax would be payable to us if you hadn’t used the scheme, or the scheme doesn’t achieve the tax advantage that it tries to achieve – whichever applies
If you’re already in a warning period and we defeat another tax avoidance scheme that you’ve used, we’ll give you a new warning notice. That notice will extend your existing warning.
And yet more sanctions
‘If we defeat one or more new schemes that you’ve used during a warning period, we’ll charge you a penalty. We’ve explained above what we mean by ‘new scheme’. The penalty will be calculated as a percentage of the counteracted advantage. The counteracted advantage is normally the additional tax due, but we would tell you more about this at the time. If we defeat 3 new schemes that you’ve used, and you’ve used them all during the same warning period, we may publish your name and other details to identify you as a serial tax avoider.
If we defeat 3 new schemes that you’ve used during a warning period, and each of those schemes involves the misuse of direct tax reliefs, we’ll stop you from claiming, or making use of direct tax reliefs for 3 years. If this happens, we’ll give you a ‘relief restriction notice’.
Is this all getting out of hand?
The serial tax avoider was certainly a feature of the tax landscape 10 years ago. Today, this once prevalent beast is pretty much exterminated. Planning today is bespoke rather than mass marketed. That is to say individual tax avoiders are near extinct. The large corporates are still being treated considerably more leniently. Why?
Levy and Levy – the tax investigations and resolution specialists.