On 20 July 2021 the UK government published for consultation new proposals aiming to restrict the activities of promoters of tax avoidance schemes, together with draft legislation. The consultation will close on 14 September 2021.

The government originally announced on 12 November 2020 that they planned to take further measures to combat the promoters and marketers of tax avoidance arrangements, along the lines of the strategy outlined in “Tackling promoters of mass-marketed avoidance schemes”, which was published on 19 March 2020.

A consultation was launched on 23 March 2021 with a new package of potential measures to disrupt the business model of the promoters of avoidance schemes. That consultation closed on 1 June 2021 and the government has published a summary of responses from interested parties.

The draft legislation would target persistent promoters and enablers of the schemes and would restrict the supply of such arrangements. It includes a new power for HMRC to ask for freezing orders to stop promoters hiding their assets before they can pay penalties imposed for breaching their obligations under the UK’s anti-avoidance legislation.

Under the draft legislation an additional significant penalty would be imposed upon any UK entity that facilitates the promotion of tax avoidance schemes by offshore promoters. This would apply to any UK entity that incurring a penalty under the legislation relating to the promoters of tax avoidance schemes (POTAS), the disclosure of tax avoidance schemes (DOTAS), or the disclosure of tax avoidance schemes: VAT and other indirect taxes (DASVOIT) regime, up to the value of GBP 100,000, on or after the date the legislation receives the Royal Assent.

Also, HMRC would be empowered to present a winding-up petition to the Court if a company is considered to be operating against the public interest.

Under draft legislation HMRC would be given the power to name promoters of schemes and give details of their methods of promoting tax avoidance and of the schemes they promote at an early stage. This legislation would apply to anyone known or suspected of being a promoter of tax avoidance, including entities and individuals that influence the promoter or that are part of the structure promoting avoidance schemes. The legislation would also apply to individuals and entities performing an identifiable role in selling tax avoidance schemes or to individuals that need to be named so the taxpayer will understand the arrangements. This would warn taxpayers of the risks of using such schemes and would encourage those already involved in tax avoidance to stop using the schemes.