The UK has published a consultation document entitled “Raising the Stakes on Tax Avoidance”. Comments are invited from interested parties on further measures to discourage the propagation of artificial tax avoidance schemes.  The closing date for the receipt of comments is 4 October 2013.

The consultation document proposes further measures requiring details of artificial tax avoidance schemes to be referred to HMRC by high risk promoters of schemes. The proposed measures are also intended to ensure that HMRC has the appropriate information powers to enforce the provisions, backed up by an adequate penalty regime. The existing regime in respect of the disclosure of tax avoidance schemes (DOTAS) would be amended to ensure the timely disclosure of full information to HMRC. The measures would also aim to ensure that high risk promoters of avoidance schemes are well informed of the measures HMRC are empowered to take to enforce compliance and are aware of the consequences of non-compliance.

The measures would introduce a higher standard of reasonable care for the promoters of tax avoidance schemes and the users of the schemes and the proposals would also impose stricter conditions for a defense of legal excuse. HMRC would aim to encourage persons who use avoidance schemes to reach a settlement with them if a similar scheme to the one they are using has failed in the Courts.

An important feature of the consultation will be the definition of a high risk promoter of avoidance schemes. On the one hand, HMRC wishes to introduce effective legislation that requires such promoters to submit full information of artificial tax avoidance schemes. On the other hand, many advisory firms may be concerned that the new measures will be framed too broadly and will involve legitimate tax advisers in further unnecessary compliance procedures. When the original DOTAS provisions were introduced around ten years ago many tax advisers had to introduce new internal procedures to ensure that they complied with the new provisions and were not exposed to a risk of penalties for non-compliance. They will therefore wish to ensure that this legislation is targeted specifically at high risk promoters of schemes and that a sufficiently clear definition of such promoters is included in the legislation.