HMRC Consults On Stronger Anti-Avoidance Sanctions
HM Revenue and Customs (HMRC) has published details of proposals to strengthen sanctions against serial promoters and users of tax avoidance schemes, and introduce specific penalties where the General Anti-Abuse Rule (GAAR) applies.
The plans are set out in a new HMRC consultation, which explains how each of the measures would work. The consultation will run until October 14. It builds on the responses received during a previous consultation, held prior to March’s Budget. At the Budget, Chancellor George Osborne confirmed the Government’s intention to introduce a surcharge and special reporting requirements for serial avoiders and a tax-geared penalty for cases where the GAAR applies.
The Government proposes that the first defeat of a tax avoidance scheme would trigger a “warning period,” during which the taxpayers involved would be issued with a warning notice and advised of certain additional consequences of entering into further schemes within a set period. Affected taxpayers would then have to certify annually whether they had entered into any avoidance scheme.
Taxpayers entering into further avoidance schemes during the warning period would be required to provide additional information and the reasons why they considered the schemes to work. If any of the schemes concerned were defeated, a new warning period would commence. The Government proposes to name as “serial avoiders” those who enter into three or more schemes during their warning period.
In addition, the consultation seeks views on two possible approaches to the implementation of a surcharge for serial avoiders. The first is the introduction of a simple low level of charge, similar to current late-payment penalties. The second option is a higher surcharge rate similar to that applied with Follower Notices, with the possibility for reductions in the rate to reflect co-operation or disclosure by the taxpayer. The Government proposes that under either model, a serial avoider who during a warning period continues to use avoidance schemes that are defeated should face increasing rates of surcharge.
The consultation also sets out plans for the introduction of a GAAR penalty that would apply when a taxpayer submits a return, claim, or other document that includes a tax advantage arising from abusive tax arrangements coming within the scope of the GAAR. The penalty would only be chargeable after the scrutiny of the GAAR Advisory Panel, at the point at which HMRC has successfully counteracted the abusive tax arrangements concerned. Taxpayers would be able to correct their tax position up until the point of referral to the GAAR Advisory Panel.
