Budget 2020: extra powers for HMRC to combat tax avoidance promoters

The government will ramp up its campaign against promoters and marketers of tax avoidance schemes by taking swifter action and charging 100% penalties on the fees they earn, reports Zak Jakubowski

As part of the clampdown on abuse of the tax system, HMRC will publish a new strategy for tackling the promoters of tax avoidance schemes.

This will outline a range of policy, operational and communications tools both underway and in development ‘to drive those who promote tax avoidance schemes out of the market, disrupt the supply chain to stop the spread of marketed tax avoidance, and deter taxpayers from taking up the schemes’.

The government is investing in additional compliance officers and new technology for HMRC. The overall tax avoidance measures are expected to raise an additional £4.7bn between now and 2024-25 by enabling HMRC to further reduce the tax gap through additional compliance activity and expanding debt collection capabilities.

HMRC will be given additional powers to obtain information about individuals who are running abusive schemes as soon as they are identified. This will strengthen HMRC’s existing regime to tackle enablers of tax avoidance schemes.

The Budget 2020 Red Book stated that enabler penalties will be ‘felt without delay’ for multi-user schemes, meaning anyone enabling tax avoidance arrangements that are later defeated will face a penalty of 100% of the fees they earn.

HMRC will act promptly where promoters fail to provide information on their avoidance schemes.

In particular, these changes will help HMRC obtain the information needed to bring a scheme into the disclosure of tax avoidance schemes (DOTAS) regime and allow them to act faster where avoidance schemes are being promoted.

This measure will also ensure promoters fulfil their obligations under the promoters of tax avoidance scheme (POTAS) regime, including where they have tried to abuse corporate structures to get around the rules, the government said.

Further technical amendments will be made to the POTAS regime, including preventing spurious legal challenges from disrupting the process of scrutinising promoters.

Additional changes will also be made to the general anti-abuse rule (GAAR) so it can be used as intended to tackle avoidance using partnership structures.

Legislative changes will be set out in the next wave of draft legislation set for Finance Bill 2020-21.

Raising standards of tax advice

The government will also consult in the spring on raising standards for tax advice. Currently tax advisers who are members of the top six professional bodies follow the Professional Conduct in Relation to Taxation (PCRT) code of conduct but many tax advisers are not members and fall outside this voluntary code.

The consultation will seek evidence about providers of tax advice, current standards upheld by tax advisers, and the effectiveness of the government’s efforts to support those standards, in order to give taxpayers more assurance that the advice they are receiving is reliable.

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