Spring Budget 2017 – Promoters of Tax Avoidance Schemes (POTAS): associated and successor entities rules

Changes to the POTAS legislation were introduced in Finance Act 2015 to ensure promoters did not set up different (associated and successor) entities to circumvent the legislation. HMRC have announced a new measure that will ensure the associated and successor entities rules function as intended.

Legislation will be introduced in Finance Bill 2017 to amend the control definitions in the POTAS legislation. The amendments introduce the term ‘significant influence’ to ensure that promoters cannot reorganise their business interests (e.g. by putting persons between themselves and the promoting business) to circumvent the legislation.

The amendment also ensures that the control definitions will apply where two or more persons together have control or significant influence over a business.

The aim is to restrict the opportunities available to promoters of avoidance schemes to circumvent the POTAS legislation through the use of associated and successor entities. The legislation means that HMRC will look through any artificial business reorganisation that seeks to distance the promoter from the promoting business. The promoter will continue to be caught by the POTAS legislation as was intended when the legislation was initially enacted.

The amendments to the POTAS legislation takes effect from 8 March 2017.