Tax avoidance remains a significant drain on the UK’s finances, with recent estimates suggesting it deprives the Treasury of around £1.8 billion each year, funds that could otherwise support vital public services such as healthcare and education.
In response, the Government is strengthening HM Revenue & Customs’ (HMRC’s) authority to combat schemes that attempt to sidestep the tax system.
These changes mark a change in approach, with increased penalties and wider powers designed to deter both promoters and participants.
Strengthening the rule – What is changing?
The Disclosure of Tax Avoidance Schemes (DOTAS) regime is being revised to close gaps that have previously allowed certain arrangements to avoid scrutiny.
A newly introduced ‘hallmark’ will make it easier for HMRC to identify and capture schemes that have until now gone undetected under the existing disclosure requirements.
This hallmark will target specific characteristics commonly found in avoidance arrangements, even if they are dressed up as legitimate tax planning.
In tandem, there will be a tougher criminal offence for failing to disclose arrangements under DOTAS.
Whether or not the scheme ultimately achieves its intended tax outcome will be irrelevant.
Simply being involved in non-disclosed avoidance could now result in a prison sentence of up to two years and an unlimited fine.
Direct enforcement and immediate consequences
HMRC will also have the power to impose penalties without needing to go through the courts, though promoters will retain the right to appeal through a tax tribunal.
This streamlined process is aimed at stopping activity quickly before further damage is done.
Two further tools, the Universal Stop Notice (USN) and Promoter Action Notice (PAN), will enable HMRC to demand an immediate halt to the promotion or facilitation of avoidance schemes.
These notices are not limited to scheme promoters themselves; they may also apply to professionals, such as solicitors or accountants, who are knowingly assisting in their design or dissemination.
This is part of an effort to hold all parties accountable, not just those actively marketing schemes, but anyone playing a supporting role.
What this means for you
The involvement in avoidance schemes is a serious offence, and ignorance is no longer an excuse.
It is your responsibility to ensure you are not entangled in arrangements that could be classed as avoidance.
