Companies and individuals who have engaged in tax planning strategies are more open to scrutiny than ever before.
HMRC is now considering the tax affairs of those it believes have been involved in tax avoidance schemes in more depth and with greater financial repercussions.
Legislation that has been introduced means schemes that fall into certain criteria must be disclosed and given a Disclosure of Tax Avoidance Schemes (DOTAS) number. This number must then be reported on the taxpayer’s tax return. Anyone participating in a scheme should be aware that an investigation is likely to follow. This will usually be conducted by HMRC’s Specialist Investigations Team, and their enquiries can be lengthy, wide-ranging and highly technical. Even if a DOTAS number has not been given for a particular scheme, taxpayers can still be subject to an investigation and the same procedure will be followed.
Any taxpayer that fails to disclose their involvement in a tax avoidance scheme can receive a financial penalty.
Tax Avoidance Scheme Legislation
Tax avoidance schemes are listed by HMRC under the: DOTAS (Disclosure of Tax Avoidance Schemes) Legislation.
A tax arrangement must be disclosed to HMRC when:
- It will, or might be expected to, enable any person to obtain a tax advantage;
- The tax advantage is the main benefit or one of the benefits of the arrangement;
- The tax arrangement falls within the description prescribed in the relevant regulations.
Disclosure of the scheme will generally be made by the scheme’s promoter, who is responsible for the design of the scheme or for making the scheme available to others.
How are the Participants of a Tax Avoidance Scheme Treated?
Once a judicial ruling has been made that a particular piece of tax planning constitutes a tax avoidance scheme, those companies involved in the scheme will usually be sent a follower notice, an accelerated payment notice or both from HMRC.
If you use a tax avoidance scheme that has the same or similar arrangements as one HMRC has successfully challenged in court, you may be sent a follower notice. This will ask you to settle your tax affairs with HMRC. Fail to do so and you may have to pay a penalty. You may also receive an accelerated payment notice.
Accelerated Payment Notices (APN)
You may receive an accelerated payment notice if there’s an enquiry, dispute or appeal in progress that relates to your tax affairs and you’ve:
- Been given a follower notice; or
- Used a DOTAS notifiable arrangement; or
- Received a General Anti-Abuse Rule (GAAR) counteraction notice.
If you receive an accelerated payment notice, you must pay the disputed tax in advance of the enquiry or dispute being settled. HMRC will then hold this money until the enquiry into your affairs is complete. If HMRC finds your tax affairs are in order, the amount will be repaid. If you don’t pay the amount requested in the accelerated payment notice, you may have to pay a penalty.
Need Advice About Involvement with Tax Avoidance Schemes?
If you’d like advice about a follower notice or accelerated payment notice you have received, please call our team of professional advisors on 08000 746 757 or email: firstname.lastname@example.org.