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HMRC's growing arsenal of powers against enablers of tax avoidance

Posted on 08 September 2020

As discussed in our previous article HMRC has been growing its arsenal of powers to tackle "enablers" and "promoters" of tax avoidance at a quickened pace since 2017. On 21 July 2020, HMRC published a consultation and draft legislation for new proposals to strengthen those existing powers.

The key current measures are as follows:

  1. The Disclosure Of Tax Avoidance Schemes (DOTAS) regime, under which promoters of avoidance schemes must (voluntarily) give HMRC information about the schemes and their clients.
  2. The Promoters Of Tax Avoidance Scheme (POTAS) rules, under which the activities of repeat promoters of avoidance schemes are monitored and potentially sanctioned.
  3. The Enablers legislation, whereby tax agents, intermediaries and others who design, market or facilitate the use of defeated abusive avoidance schemes face penalties for doing so and may be "named and shamed".
  4. The General Anti-Abuse Rules (GAAR), which can be used to reverse any tax advantage gained through use of an abusive scheme.

The new proposals include allowing HMRC to:

  • issue stop notices earlier to promoters and potentially "name and shame" them, under POTAS;
  • under the Enablers legislation, extend (and speed up) their:
    • information powers in much the same was as they enquire into tax returns; and
    • powers to enforce the penalty;
  • act more quickly where promoters fail to provide information under DOTAS, using a two-stage approach: the first being an information notice, and (if not adequately complied with) the second being HMRC issuing a DOTAS Reference Number; and
  • extend its powers under GAAR to partners and partnerships entering into abusive arrangements.

If approved as proposed, the measures would be included in the Finance Bill 2020-2021, and in some cases would have retrospective effect. The consultation closes on 15 September 2020.

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