Historically, in cases where HMRC establish that a UK taxpayer was involved in a tax avoidance scheme, tax-geared penalties were not considered on the basis that the taxpayer sought professional advice (including Counsel’s opinion) and therefore took reasonable care.
HMRC consider that some taxpayers utilised aggressive tax avoidance schemes to achieve a cash flow advantage and consider the behaviour to be careless or worse. In these cases, HMRC will pursue tax geared penalties.
HMRC intend to review what constitutes reasonable care in avoidance cases and introduce new measures to deter ‘serial avoiders’. These will come in the form of higher penalties, publication of the entities’ details and restrictions to their access to tax reliefs.
Finance Bill 2016 will also include:
- changes to the Promoters of Tax Avoidance Schemes (POTAS) regime to broaden it to cover promoters that are regularly defeated by HMRC; and
- a new 60% penalty for cases successfully tackled by the GAAR
HMRC wish to deter UK taxpayers from using tax avoidance so that these schemes are considered to be too risky and the risks greatly outweigh the benefits. There is continued focus on promoters of tax avoidance schemes to discourage investment of time and money in abusive tax planning.