A consultation document published by HMRC entitled Strengthening Tax Avoidance Sanctions and Deterrents has elicited strong support for it’s proposals to force the promoters of tax avoidance schemes to assume some of the risk.
The consultation closed in October of last year, and the subsequent paper contained several proposals, including a new penalty for any individual who constructs, markets, sells or otherwise enables the use of tax avoidance arrangements that have been defeated by HMRC, and a change in the penalty rules for those who use tax avoidance schemes that have been defeated by HMRC.
The paper also sought views on other ways that HMRC could discourage avoidance, as well as any further action that the government should take to change taxpayer behaviour.
The new penalty for the enablers of tax avoidance schemes will apply to all abusive schemes that HMRC has defeated. It will impose a fixed, 100 per cent fee-based penalty that will apply to all individuals in the supply chain. The penalty will apply to advice provided after royal assent to the Finance Bill 2017.
The term ‘enabler’ will include everyone who is in the supply chain and who benefits from a taxpayer who implements tax avoidance arrangements that are later defeated by HMRC, and without whom the arrangements could not be put in place. The focus of the penalty is on those individuals who gain financial benefit from enabling others to employ tax avoidance arrangements that fail.
The consultation elicited a range of responses, with some strongly supporting the new penalty for enablers, while others were concerned that if it was not used appropriately it could hinder impartial advice and genuine commercial arrangements.