28 May 2014

Parts 4 and 5 of the Finance (No.2) Bill include the legislation on which HMRC has consulted over the last 6 or 12 months in relation to tackling tax avoidance. Part 4 deals with follower notices and accelerated payments, and Part 5 with promoters of tax avoidance schemes (otherwise known as high risk promoters).

A summary of the provisions

Follower notices and accelerated payment notices:

1. The Part 4 clauses and related Schedules introduce two new consequences for certain users of tax arrangements.

2. The first is a power for HMRC to issue a “follower notice” where those tax arrangements have been shown in a relevant judicial ruling not to give the asserted tax advantage. The legislation sets out the steps that a taxpayer should take to settle their dispute with HMRC in response to the “follower notice”, and what happens if a taxpayer elects not to take those steps, including the possibility of a penalty. The taxpayer has a right of appeal against any penalty charged under these provisions.

3. The second is a requirement to pay the amount of the asserted tax advantage to HMRC on receipt of an “accelerated payment notice”. This notice can be given in three cases:

i. Where a follower notice is issued, as described above;
ii. Where the tax arrangements are disclosable under the Disclosure of Tax Avoidance Scheme (DOTAS) rules; or
iii. Where HMRC is taking counteraction under the General Anti-Abuse Rule (GAAR).

4. The measure applies to Income Tax (IT); Capital Gains Tax (CGT); Corporation Tax (CT), including amounts chargeable as or treated as CT; Inheritance Tax (IHT); Stamp Duty Land Tax (SDLT); and the Annual Tax on Enveloped Dwellings (ATED). The legislation provides for further taxes to be added to the measure by Treasury Order.

High risk promoters:

The Part 5 clauses and the related Schedules introduce new legislation which will apply to certain promoters of tax avoidance schemes. In broad outline, the provisions define promoters of avoidance schemes, identify when they have triggered “threshold” conditions targeting specified behaviours, and provide for a “conduct” notice to be applied to these promoters. Those who fail to comply with a conduct notice may be issued with a “monitoring” notice, which requires pre-approval by a Tribunal. Names of promoters subject to a monitoring notice will be published by HMRC, including details of how the conduct notice was breached, and the promoter will be required to publish its monitored status to clients. Information requirements will apply to monitored promoters, and intermediaries and clients of monitored promoters.


It is worth mentioning a little about the background to these provisions.

If you need more detail, we would refer you to the consultation documents entitled “Raising the stakes on Tax Avoidance” and the summary of response and draft legislation (the latter dated January 2014) and the consultation document entitled “Tackling Marketed Tax Avoidance” and the summary of responses (the latter dated March 2014).

Set out below are some paraphrased extracts from the latter.

1. The Government has made clear that it will take a robust approach to tackling tax avoidance.

2. To this end, the Government has taken a number of major steps, including the introduction of the GAAR, new rules to tackle “disguised remuneration” and closing down a number of loopholes.

3. However, there is more to do; particularly to tackle behaviours involving marketed avoidance schemes.

4. Promoters devise schemes, often complex and contrived, in an attempt to exploit certain features of the tax system and, at their most extreme and abusive, look for loopholes for no other purpose than to avoid paying the tax that should be due.

5. The high level of complexity and contrivance inevitably means that these schemes are difficult to analyse and challenge, but despite this HMRC has a very successful record. Around 80 per cent of cases that have been decided by the Tax Tribunals and Courts in the recent years have been won by HMRC.

6. But - this often follows several years of enquiry, investigation and litigation, during which time the majority of the taxpayers involved have been able to enjoy the use of the tax that they were trying to avoid.

7. The Government’s view is that this position is unacceptable;….. self assessment….. and the ability to apply for the postponement of tax whilst an appeal is resolved was not designed to assist those who contrive complex arrangements with the purpose of avoiding tax, retaining the cash advantage in the meantime.  

8. The Government’s proposals therefore have a simple objective of changing the presumption of where the tax sits so that anyone who enters into an avoidance scheme will have to pay over the tax in dispute.

9. The vast majority of taxpayers pay the right tax at the right time and should not have to subsidise those who avoid tax. One part of this strategy is to tackle the behaviour of high risk promoters.

10. Requiring high risk promoters to provide information to HMRC about their products and clients will allow HMRC to take early targeted action. Naming high risk promoters will put their customers and the general public on warning that the behaviour of those promoters is unacceptable and that anyone who uses their avoidance schemes will find their tax affairs being closely examined by HMRC.

Will these proposals be enacted?

The short answer is yes. The Government is committed to all three elements of this strategy. Subsequent briefing notes will describe the regimes more detail, and point out certain problems in the way that the legislation currently operates. It is likely (but by no means certain) that some of these problems will be resolved before the draft legislation is enacted in the summer but there is little chance of these proposals going away between now and then.

If you would like to discuss these proposals, or any other tax issue please call or email the key contact identified at the top of this page.

Key contact

Paul Haggett

Paul Haggett Partner

  • General Counsel
  • DPO

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