The government consults on sanctions for serial avoiders, promoters and GAAR specific penalties

Consultation on strengthening sanctions against tax avoidance

The government is consulting on increased sanctions against selected tax avoiders with the introduction of surcharges and ‘special measures’ for serial users of tax avoidance schemes and the introduction of specific penalties where the General Anti-Abuse Rule (GAAR) applies.

David Gauke, Financial Secretary to the Treasury in his forward to the consultation document says ‘there remains a small but hardened core of tax avoiders who are determined to try to pay less tax at every opportunity’, and that the consultation ‘sets out proposals for additional sanctions to target these especially persistent tax avoiders.’

Serial Avoiders

Views are requested on how serial avoiders should be identified and whether the imposition of surcharges would be a deterrent to taxpayers repeatedly using tax avoidance schemes.  If such financial surcharges are to be imposed, the consultation raises the questions as to how the surcharge should be calculated making reference to how many avoidance schemes have been used and over what period.

Alongside the introduction of surcharges, HMRC are also consulting on whether some avoiders should be subject to ‘special measures’.   Special measures could be triggered by having a history of using avoidance schemes that have failed; being user of schemes sold by monitored promoters or other markers of risk such as failure to comply with information notices or DOTAS requirements.

The result of triggering special measures would be the possible restriction of certain reliefs; a requirement to comply with a conduct or stop notice; requirement to provide additional documents and information about their affairs as a matter of course, the provision of certificates about their use of tax avoidance schemes and the publishing of their names as serial avoiders.

Serial promoters

HMRC are also consulting on how serial promoters could fall within the Promoters Of Tax Avoidance Schemes (POTAS) rules targeted at high risk promoters.  Serial promoters could be subject to conduct notices etc. if a significant number of the promoter’s schemes notified under DOTAS subsequently fails at tribunal or in the courts.

GAAR Penalties

Finally, the GAAR can already deny a cashflow advantage to avoiders by being a trigger into the ‘accelerated payments’ legislation.  However, the government would like to introduce GAAR specific penalties and are consulting on the quantum of any such penalties and how they may be applied.

Initially, when the GAAR was legislated HMRC did not impose GAAR related penalties in order for tax payers and their advisors to become accustomed to the new legislation.  The argument for penalties is that the legislation had been in place for 18 months, so taxpayers are used to applying it and as with any other aspect of legislation, HMRC consider that penalties should be levied for non-compliance.

The closing date for comments on the consultation document is 12 March 2015.   Gabelle are responding together with the IFA.  If you have any comments please contact the TaxDesk on 0845 4900 509 and ask for John Hood.