The measure
As part of the government’s wider drive to close the tax gap, it is seeking views in relation to a range of new measures intended to tackle promoters (and other enablers) of marketed tax avoidance, which the government states currently contributes £500m to the tax gap.
The proposed measures would give HMRC additional powers and allow them to impose stronger sanctions enabling them to more efficiently and effectively disrupt the business model that promoters and enablers of tax avoidance rely upon.
The consultation seeks views on proposals in four areas, namely:
- Expanding the scope of DOTAS so as to introduce a new hallmark directly targeted at disguised remuneration schemes; introducing a criminal offence for the failure to notify arrangements under DOTAS;and updating the DOTAS civil penalty regime to allow HMRC to directly impose a DOTAS penalty, rather than the Tax Tribunal;
- Introducing a Universal Stop Notice, which would require all persons to stop promoting or enabling a scheme that is the same or similar to that specified in a notice, and a Promoter Action Notice, which would require businesses to stop providing products or services to promoters and enablers of tax avoidance where those products or services are connected to the promotion of tax avoidance;
- Tackling controlling minds and those behind the promotion of avoidance schemes through new highly targeted obligations and stronger information powers. In relation to this, it has been proposed that the following could be introduced:
- A Connected Parties Information Notice, which would compel persons that HMRC suspect to be connected to the promotion of marketed tax avoidance schemes to provide relevant information and documents, with strong sanctions for non-compliance, which would include criminal sanction; and
- A Promoter Financial Institution Notice, which would allow HMRC to obtain access to financial or banking data of promoters of tax avoidance, without approval from the Tax Tribunal, in order to check whether the obligations of a promoter are being met.
- Exploring options to tackle legal professionals who design or contribute to the promotion of avoidance schemes, whereby historically such professionals have been protected by legal professional privilege and this has left HMRC unable to effectively investigate and challenge the promotion of tax avoidance. In relation to this, the government is proposing targeted changes, which includes:
- Changes to the DOTAS legislation which would allow HMRC to publish the details of legal professionals who promote tax avoidance schemes;
- Broadening the general legislation relating to the publishing of details of promoters, in order to allow HMRC to publish the details of legal professionals who have been part of designing tax avoidance schemes;
- The introduction of a deemed waiver of legal professional privilege where a legal professional markets a tax avoidance scheme and that is supported by a legal opinion. In such a case this would require the promoter to disclose the legal advice to HMRC;
- Engage with the legal professional bodies to discuss the operation of their codes of conduct and how HMRC can better support them to take appropriate action against members who are breaching those rules in cases of promoting and enabling tax avoidance; and
- Make HMRC’s view clear on when they consider that legal professional privilege does not apply, which is intended to be a clear signal as to how HMRC intend to approach disputes relating to legal professional privilege.
The consultation poses sixty-two questions to stakeholders on various aspects of the proposed reforms, detailed in the consultation document. HMRC will review the responses from the consultation and publish a summary. The feedback will inform future policy proposals and draft legislation for further consultation.
Who will be affected?
This is intended to impact those who promote and enable tax avoidance arrangements generally, alongside those who work in specific sectors, such as legal professionals.
When will the measure come into effect?
The consultation will run for 12 weeks from 26 March to 18 June 2025.