The UK budget announcements on 27 October 2021 included measures targeting persistent promoters and enablers of tax avoidance schemes. The proposals aim to facilitate the process for taxpayers to identify and exit avoidance schemes.
This follows a consultation launched on 23 March 2021 entitled ‘Clamping down on promoters of tax avoidance’, outlining proposed measures. HMRC published a summary of responses to that consultation on 20 July 2021 and issued for further consideration draft legislation for each of the new measures. That consultation closed on 14 September 2021.
Freezing orders
A new power will be available for HMRC to apply for freezing orders to prevent scheme promoters from hiding their assets before they pay the penalties imposed for breaching their obligations under the anti-avoidance regimes.
The measures are designed to ensure that any penalties charged by HMRC under the anti-avoidance regimes can be subject to an order, and they would permit funds to be ring-fenced so scheme promoters and enablers cannot escape the relevant penalties.
The freezing orders will apply to the relevant anti-avoidance penalties under the Promoters of Tax Avoidance Scheme (POTAS), Disclosure of Tax Avoidance Schemes (DOTAS), and Disclosure of Avoidance Schemes for VAT and other Indirect Taxes (DASVOIT) regimes that are assessed or determined on or after the date of Royal Assent of the Finance Bill 2021/22.
UK entities facilitating schemes of offshore promoters
Other new rules would allow HMRC to impose a significant additional penalty on a UK entity that facilitates the promotion of tax avoidance by offshore promoters. This measure is designed to deter these UK entities from facilitating the sale of tax avoidance schemes in the UK. A penalty could be imposed in an amount up to the total fees earned by the scheme.
This would apply to any UK entity that incurs a penalty or penalties under the POTAS, DOTAS or DASVOIT regimes where the aggregate value is at least GBP 100,000 and the penalties relate to activities carried out on or after the date of Royal Assent of Finance Bill 2021-22. In the case of UK entities incurring penalties under the Enablers penalty regime or for breaching a stop notice, the GBP 100,000 threshold would not apply.
Winding-up petitions
Also, HMRC would be able to present winding-up petitions to the court in relation to companies or partnerships that are considered to be operating against the public interest, so they could be removed from the market. The final decision on winding up would remain with the courts.
This would apply from the date of Royal Assent of the Finance Bill 2021/22, but HMRC can consider all the available information, including information pre-dating Royal Assent, in taking a decision on presenting a petition.
Naming promoters of avoidance schemes
HMRC would be empowered to name the promoters of avoidance schemes, provide details of the way they promote tax avoidance and of the schemes they promote, and to warn taxpayers about the risks of using the schemes. Taxpayers already involved in tax avoidance schemes would be given support in leaving the avoidance arrangements. This applies from the date of Royal Assent to the Finance Bill 2021/22.
