Tax avoidance arrangements notifiable to HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) are affected by this renewed focus. Taxpayers who used one or more such arrangement before 15 September 2016 will automatically be classified as a ‘serial tax avoider’ if one or more of their tax planning arrangements are defeated after 5 April 2017.
Planning is considered ‘defeated’ if:
- a final counteraction notice under the General Anti-Abuse Rule (GAAR) is given,
- a follower notice is given and the tax advantage has been finally counteracted or the taxpayer has amended his return as required,
- planning that is subject to DOTAS has been finally counteracted
- various VAT assessments have been made and can no longer be appealed.
Once a tax arrangement has been defeated, a warning notice will be issued within 90 days to the taxpayer stating that they will be in the serial tax avoidance regime for the next five years. This means that over that period they are required to supply specific information to HMRC annually. If a taxpayer in the regime uses further tax arrangements to try and reduce the amount of tax they need to pay and any of those are subsequently defeated then HMRC can charge serial tax avoidance penalties of up to 60% of the disputed tax, restrict tax reliefs and ultimately publish the taxpayers details online.
Tax avoidance users (regardless of whether they have paid any Accelerated Payment Notice) can remain outside the regime. The way to avoid the additional scrutiny of the regime is to, before 6 April 2017, withdraw from all tax arrangements; reach a settlement with HMRC; notify HMRC of their intention to withdraw from a tax avoidance arrangement or make a full disclosure of all details concerning their use of tax avoidance arrangements.
If you’d like to read more about how we can support businesses seeking to settle with HMRC take a look here.
