As part of draft legislation for the next Finance Bill, the government has set out further measures to clamp down on promoters of tax avoidance schemes which will see HMRC given more powers.
The measure is targeted at the most persistent and determined promoters and enablers of tax avoidance and will be legislated for in the next Finance Bill 2021/22, extending HMRC’s powers to curb the worst offenders.
The proposed legislative changes are designed to clamp down on the supply of tax avoidance arrangements and include:
- new power for HMRC to seek freezing orders that would prevent promoters from hiding their assets before paying the penalties that are charged as a result of them breaching their obligations under the anti-avoidance regimes;
- new rules that would enable HMRC to make a UK entity, which facilitates the promotion of tax avoidance by offshore promoters, subject to a significant additional penalty;
- a new power to enable HMRC to present winding-up petitions to the Court for companies operating against the public interest; and
- new legislation that would enable HMRC to name promoters, 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 get out of avoidance.
The new power to seek freezing orders is designed to ensure that any penalties charged by HMRC under the anti-avoidance regimes can be subject to an order and that funds can be ring-fenced to make sure that promoters and enablers of tax avoidance schemes cannot escape the financial consequences of their non-compliance. The proposed changes would enable HMRC to seek a freezing order where they are about to commence proceedings for a tribunal assessed penalty under current anti-avoidance legislation.
The additional penalty for UK entities involved in an offshore promoter’s business activities is designed to deter these entities from facilitating the sale of avoidance schemes in the UK. Those that are not deterred may face a penalty up to the total fees earned by the scheme.
The new power to enable HMRC to present winding-up petitions to the Court is designed to disrupt the business activities of companies who are operating against the public interest by removing them from the market and reducing the harm they cause to taxpayers and the wider economy. The current law only allows HMRC to apply for freezing orders where there is an existing cause of action, such as an enforceable debt.
New legislation enabling HMRC to name promoters, details of the way they promote tax avoidance, and schemes at the earliest point will help warn taxpayers of the risks involved in getting into tax avoidance and encourage those involved to get out of the avoidance.
The proposed changes would require HMRC to provide 30 days to those entities or individuals after HMRC has given them notice that they intend to name to allow them an opportunity to make representations as to why they should not be named.