Tax administration

Clamping down on promoters of tax avoidance

The government has announced four new measures targeted at the promoters and enablers of tax avoidance schemes. They are due to be included in Finance Act 2022.

• A power for HMRC to seek freezing orders preventing promoters from dissipating or hiding their assets in advance of proceedings for a Tribunal-assessed penalty under the Promoters of Tax Avoidance Scheme (POTAS), Disclosure of Tax Avoidance Schemes (DOTAS), and Disclosure of Avoidance Schemes for VAT and other Indirect Taxes (DASVOIT) regimes. The government is concerned that the current legal requirement to show a cause of action may enable promoters to dissipate assets before proceedings have commenced.
• Rules enabling HMRC to make a UK entity that facilitates the promotion of tax avoidance by offshore promoters subject to a significant additional penalty, subject to conditions. The legislation would apply to any UK entity that incurs a penalty or penalties under the POTAS, DOTAS or DASVOIT regimes of an aggregate value of at least £100,000. It would also apply to UK entities that incur penalties under the enablers penalty regime or for breaching a stop notice, without reference in either case to the value of the penalty.
• A power for HMRC to present winding-up petitions to the court for companies or partnerships involved in or associated with the promotion of tax avoidance that are operating against the public interest whether there is a debt or not. Currently, HMRC can only take action itself against promoter companies where there is a tax debt.
• Rules enabling HMRC to name those HMRC knows or suspects of being promoters of tax avoidance, including the entities and individuals that control or influence the promoter or others that are part of the promoter structure, details of the way they promote tax avoidance, and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to leave avoidance arrangements. The proposed power would enable HMRC to name a particular scheme, its arrangements and how it is being made available to taxpayers or administered, from when HMRC first learns about it. The new power would also enable HMRC to publish any other information or documents relating to the arrangement, entities or individuals which HMRC reasonably believe will ensure that members of the public can identify the arrangements and understand them and the risks which attach to them. The rules would require HMRC to provide 30 days' notice to the entities or individuals concerned to allow them an opportunity to make representations.

These measures are targeted at the most persistent and determined promoters and enablers of tax avoidance. They provide further confirmation of the government's willingness to take strong action against those it considers promote and enable tax avoidance.

Discovery assessments

The government has announced that a measure will be included in Finance Act 2022, which will affect individuals who incur the High Income Child Benefit Charge (HICBC), tax charges relating to Gift Aid Donations and a number of different pension charges.

The measure will confirm that if taxpayers have failed to notify HMRC of these liabilities, and/or have failed to complete self-assessment tax returns relating to these liabilities, HMRC may lawfully issue a discovery assessment to recover the tax due. The change is made in light of a recent Upper Tribunal decision (HMRC v Jason Wilkes) which found that HMRC did not have the power to recover an individual’s HICBC by issuing a discovery assessment. The legislation is intended to put beyond doubt that HMRC may use these discovery assessments to recover all of the above-mentioned tax charges.

Increasing independent representation on the OTS

The government has announced that it will legislate in Finance Act 2022 to increase the maximum independent representation on the OTS Board by two members, to a total overall membership of ten. The conclusions of HM Treasury’s review of the OTS will be published in due course.