Consultation outcome

Closing in on promoters of marketed tax avoidance — summary of responses

Updated 21 July 2025

1. Foreword

Autumn Budget 2024 marked a step change in the government’s ambition to close the tax gap. Recognising the ongoing challenge to the public finances posed by promoters of marketed tax avoidance, the government is committed to taking stronger action. The government published a consultation at Spring Statement 2025, seeking views on a package of measures designed to strengthen the regimes that target promoters of marketed avoidance schemes.

Closing the tax gap and making sure everyone is paying the tax they owe is one of my top priorities for HMRC. It is vital that these revenues are collected to fund our essential public services and make the tax system fairer. Our tax system is built on the principles of fairness, trust and compliance, and the actions of promoters of marketed tax avoidance facilitate non-compliance and contribute to the tax gap. These efforts to game the system generate no additional value for the economy and deprive vital public services of funding. It is crucial that we uphold these principles by closing in on promoters of marketed avoidance and end their activities altogether.

The government is committed to closing in on the small but persistent minority who promote marketed tax avoidance. In developing these proposals, we have sought to minimise additional burdens on compliant taxpayers and businesses, focusing our efforts on those who seek to undermine the system.

I would like to thank all stakeholders, professional bodies, and taxpayers for their engagement with this consultation. The government has carefully considered the feedback received and adapted the proposals to make them more effective and targeted. The government welcomes continued engagement from stakeholders as we work to shape a tax system that is fair, efficient and trusted by all.

2. Executive summary

The government is committed to tackling those who promote tax avoidance schemes. Marketed tax avoidance deprives important public services of the funding they need, and most schemes do not deliver the tax savings they claim to. These schemes cause harm to the tax system and individuals who use them — who may end up having to pay more than the tax they tried to avoid, including interest and penalties.

A persistent and determined group of promoters seek to exploit every opportunity to harm the tax system by selling tax avoidance schemes they claim sidestep the rules. The government is determined to close down this unacceptable behaviour.

The consultation ‘Closing in on Promoters of Marketed Tax Avoidance’ was launched on 26 March 2025 and closed on 18 June 2025. This sought views on a package of measures to strengthen the regimes that target promoters of marketed tax avoidance schemes.

The consultation focused on 4 areas:

• expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime
• introducing a Universal Stop Notice (USN) and Promoter Action Notice (PAN)
• tackling controlling minds and those behind the promotion of avoidance schemes through new highly targeted obligations and stronger information powers
• exploring options to tackle legal professionals designing or contributing to the promotion of avoidance schemes

The government also sought views on areas it intended to explore in the future.

Through consulting on these proposed measures, the government sought to make changes that were appropriately targeted to manage the burdens on businesses. The government has listened to feedback from respondents and is adapting some of the proposals where necessary.

The government received 35 written responses and held 17 meetings with stakeholders. Officials also presented the consultation at 2 stakeholder forums convened by HMRC. The government is grateful to all those (the ‘respondents’) who responded to the consultation, both in writing and through discussion.

Respondents to the consultation were generally supportive of the government’s intention to take strong action against the promoters of tax avoidance schemes. Many recognised the behaviour of promoters of tax avoidance schemes were far removed from the behaviours expected of the tax advice market more generally, and several noted the harms for taxpayers. Several respondents stated their support for individual proposals, with the most support coming for new information powers (chapter 6) and some support for new Universal Stop Notices and Promoter Action Notices (chapter 5).

Many respondents were concerned that proposals were not appropriately targeted to address the small group of 20 to 30 suspected promoters. A number of respondents also sought assurance that the proposals would be applied and managed by HMRC with appropriate safeguards. Many respondents were very concerned about the proposal for a new criminal offence for non-compliance with the DOTAS regime. There were mixed views about the introduction of new criminal offences across the range of responses more generally.

The government acknowledges and recognises concerns raised by respondents that these measures could have unintended consequences in putting additional burdens on generally compliant businesses. The government’s thinking and proposals have evolved in response to this helpful feedback. The government believes that the impact of the additional burdens on businesses will be negligible due to the number of promoter groups being targeted. The government welcomes further engagement with stakeholders on ways it could design these proposals to minimise burdens for compliant businesses.

The government continues to think there is a case for introducing a criminal offence for non-compliance with DOTAS obligations. The government has heard respondents’ concerns that a broad strict liability offence is not sufficiently well-targeted on promoters of tax avoidance and is considering how this might be addressed. The government welcomes respondents’ further reflections on how this could be done during the period of consultation on the draft Finance Bill.

A key concern raised in relation to the USN proposal was that the proposal would be allowing HMRC to create criminal offences by issuing notices that were not subject to parliamentary scrutiny. The government has taken this feedback on board and now proposes that the USNs will require secondary legislation (meaning regulations) specifying arrangements that may not be promoted. The government believes this will provide appropriate safeguards.

The government now proposes that PANs should only be issued once HMRC reasonably suspects that a promoter is acting in breach of a Stop Notice or a USN. Many respondents thought a criminal sanction would be inappropriate, or if one was appropriate, that it should only be for cases of deliberate or persistent non-compliance with PAN obligations. The government has listened to feedback from respondents and considered how sanctions for the PAN would align with other areas and does not consider that a criminal offence should be included as a sanction for non-compliance with a PAN.

The government has also undertaken further analysis of its proposed deemed waiver on legal professional privilege (LPP) and considers that the aims of the proposal can be achieved by existing powers and other measures in this package. The government has always recognised the importance of LPP and has heard respondents’ concerns about the erosion of this. The government is not now minded to proceed with this proposal, in its current format, at this time — but will continue to analyse the impact of measures on legal professionals to consider where further steps might be needed. The government is grateful for the constructive engagement from the legal sector, and others.

These changes are a part of a wider strategy to improve the tax system through engaging key sectors of our economy. Alongside measures such as making better use of third-party data, the reforms will help create a fairer, more resilient and simpler system. Draft legislation on these measures is also being published on 21 July giving respondents the opportunity to comment on it. The government will carefully consider any comments and make any appropriate amendments to the draft legislation. The consultation on the draft legislation closes on 15 September.

There have also been other developments in this policy space since the government published its consultation.

Since the consultation closed, on 19 June, HMRC published Measuring Tax Gaps 2025 edition. This included updated tax gap figures for the tax years 2015 to 2016 and onwards bringing in an updated methodology to more accurately reflect the marketed tax avoidance tax gap. This improved methodology now puts the tax gap at £0.2 billion for 2023 to 2024 and models the tax at risk at a user level rather than a scheme level. 

A joint statement was issued on 27 May 2025 between the UK Exchequer Secretary to the Treasury James Murray MP and the Isle of Man Treasury Minister Dr Alex Allinson MHK on future collaboration to tackle tax avoidance and evasion. The government will continue to work with international partners to close in on promoters who are based offshore, including by reviewing arrangements to ensure efforts to tackle promoters are effective.

3. Introduction

Comments were invited on the proposed changes. HMRC had 17 meetings with respondents as part of the consultation exercise. We received 35 written responses from:

• 13 representative bodies
• 7 accounting firms
• 5 other companies or entities
• law firms
• regulatory bodies
• charities
• all party parliamentary group and one letter from a group of MPs

A list of the respondents, excluding individuals, is found at Appendix A. This document summarises the responses and outlines the steps being taken by the government. The government is publishing draft legislation on 21 July for potential inclusion in the Finance Bill 2025.

The government would like to thank all respondents who responded to the consultation in writing or through meetings with officials. The government will continue to welcome further comments on these ideas, or any other ideas that could help it close in on promoters of marketed tax avoidance.

In addition to the questions specific to the proposals within the consultation, 2 questions were asked in the introduction:

Question 1: What other ideas, in addition to the ones in this document, should the government consider to deliver its intent of closing in on promoters of marketed tax avoidance?

Summary of responses

Responses to this question covered a wider range of suggestions. There was a consensus that promoters of marketed avoidance schemes should face greater financial consequences. Several respondents encouraged HMRC to publish more data, as their understanding of the problem facing HMRC was limited.

Several respondents commented on how most marketed tax avoidance schemes were disguised remuneration schemes operating in the umbrella market. Respondents drew links to the government’s Budget 2024 announcement that it would tackle non-compliance in the umbrella company market by legislating to move Pay As You Earn (PAYE) obligations to recruitment agencies or, where an agency is not present, to end-client businesses from April 2026.

Other respondents saw links to discussions about regulating the tax advice market more broadly, with many responses taking the opportunity to restate positions taken in previous consultations on the topic. Another respondent called for HMRC to treat promotion of marketed avoidance schemes with little prospect of success in tax law as straightforwardly as criminal behaviour, with no need for extended HMRC powers.

Many respondents remarked that promoter organisations had at least some presence offshore and felt that the measures identified would have limited effect on offshore operations. Several responses called for greater co-operation between revenue authorities to address this issue.

There was a consensus that promoters of marketed avoidance schemes should face greater financial consequences. One respondent suggested making promoters liable for tax underpaid by users. Another respondent said this would be a bad idea as it would create ‘moral hazard’ where users faced no real downside for the scheme. That respondent instead suggested introducing statutory indemnity to allow users to sue promoters, allowing no-win no-fee lawyers to pursue promoters

Government response

The government will consider proposals suggested and continue to develop suitable methods of tackling promoters of marketed tax avoidance to minimise the harm they can cause. More details of the government’s future direction can be found in Chapter 8. The government is happy to encourage any future discussions on potential ideas.

Regarding how the government might raise standards in the tax advice market, the government is separately publishing technical consultations on modernising and mandating tax adviser registration, and one on enhancing HMRC’s powers to tackle tax advisers facilitating non-compliance.

Question 2: Is there more HMRC can do to support those who use tax avoidance schemes?

Summary of responses

Respondents suggested that education of potential users of the arrangements should be a focus for HMRC, thereby increasing awareness of the risks of using tax avoidance. One respondent noted HMRC does not publish statistics on the effectiveness of its current educational campaigns, another called for more consistency in how HMRC describes marketed avoidance arrangements when communicating with taxpayers, for example, when writing to them directly.

Several responses called for HMRC to make use of monthly PAYE Real Time Information (RTI) data and quarterly data from employment intermediaries to identify users, especially those that may be unaware their employment intermediary was part of a scheme, and contact those users early in the scheme’s life to help them exit. Several responses were keen for HMRC to distinguish between users who knowingly and deliberately used schemes and those who did not know they were caught up in marketed tax avoidance.

Government response

The government appreciates all suggestions aimed at supporting those using tax avoidance schemes. All suggestions will be considered in line with the existing support in place, which includes:

• publishing details of known or suspected avoidance schemes and promoters on GOV.UK (see: List of avoidance schemes, promoters, enablers and suppliers; List of tax avoidance schemes subject to a Stop Notice
• the ‘Don’t get caught out’ campaign which was launched in November 2020 and includes videos highlighting the real-life experiences of customers who ended up in tax avoidance schemes. Since launching, the landing page has been viewed nearly 500,000 times and nearly 2,500 taxpayers have contacted HMRC to report an avoidance scheme or promoter. A further 750 have contacted HMRC to get help where they think they are in an avoidance scheme
• HMRC also provides many sources of guidance including: Guidelines for Compliance; guidance on compliance checks; and HMRC’s YouTube channel
• HMRC continues its usage of PAYE RTI to communicate with taxpayers who they suspect may be engaging in tax avoidance, and proactively put taxpayers directly on notice of its view. HMRC write to all individuals they suspect have become involved in mass marketed avoidance, advising them of the risk, with the aim to get them out of avoidance before they build up large tax bills

4. Expanding and strengthening the DOTAS regime

Overview

The consultation proposed 3 changes to the DOTAS regime:

• a criminal offence for failure to notify arrangements under DOTAS
• a new hallmark to more clearly target disguised remuneration schemes
• updating the DOTAS civil penalty regime so that HMRC may directly issue DOTAS penalties. This would bring DOTAS penalties in line with the changes made to allow HMRC to allocate a scheme reference number under DOTAS without Tribunal approval and with penalties issued under the Promoters of Tax Avoidance Schemes (POTAS) regime

Most respondents saw the introduction of a criminal offence for failure to notify arrangements under DOTAS as the most significant measure in the consultation. There was a mixed response to the DOTAS criminal proposal, with many expressing concerns about the general nature of the hallmarks, which were perceived as ‘fuzzy’. Respondents highlighted the importance of appropriate targeting when considering a strict liability offence to ensure that those providing legitimate tax advice were not accidentally affected by the proposals. Many felt that the hallmarks associated with DOTAS were not defined clearly enough for the attaching of a strict liability offence. There were also concerns that the proposals would increase the compliance burden of legitimate businesses whilst promoters continued to ignore their DOTAS obligations.

Respondents generally felt that the addition of a new disguised remuneration hallmark was not necessary, as they felt that the arrangements being targeted by the proposal would already be caught by existing hallmarks.

Respondents agreed that moving the approval of DOTAS penalties from Tribunal to HMRC was appropriate, provided that the right of appeal to Tribunal remained.

DOTAS hallmarks

Question 3: Do you think there are features of disguised remuneration schemes that could feature in a new DOTAS hallmark that makes it clearer that disclosure is required and reduces the burden on HMRC of sanctioning non-compliance?

Question 4: For the purposes of this DOTAS hallmark, should consideration be given to any specific exclusions, for example reimbursement of certain employment related expenses?

Question 5: Are there other areas or arrangements where a new DOTAS hallmark would help the government tackle marketed tax avoidance?

Summary of responses

Respondents had mixed views about potential new DOTAS hallmarks. Many believed that the types of schemes that the proposed new hallmark was targeting were already disclosable under other existing hallmarks. Some respondents pointed to the current ‘Employment Income Provided Through Third Parties’ hallmark and suggested that HMRC could consider amending the existing hallmark to better target undisclosed schemes.

Some respondents were concerned about the proposed broad nature of a new disguised remuneration hallmark and what safeguards would be put in place to ensure it did not capture routine tax planning. They also wanted to know how it would interact with the proposed criminal offence for failure to disclose arrangements under DOTAS.

Government response

The government notes the views from respondents that disguised remuneration schemes are already covered by existing hallmarks, or existing hallmarks could be amended. The government continues to consider options in respect of a new disguised remuneration hallmark. Since any new hallmark could be introduced through secondary legislation without the need for further primary legislation, draft legislation on this proposal is not included in the draft Finance Bill. Should the government proceed with these proposals, the government will undertake technical consultation on the legislation before proposing legislation to Parliament.

The government will keep the DOTAS regime under review, including the hallmarks, to ensure the continued effectiveness of the regime.

Criminal offence for failure to notify arrangements under DOTAS

Question 6: Do you agree that the twofold approach of civil penalties and a criminal offence will provide a stronger deterrent?

Question 7: Should the criminal offence be restricted to schemes where there is a promoter acting?

Question 8: What reasonable care/excuse arguments would be appropriate? How might these be framed to prevent promoters from abusing these aspects? What reasons should be excluded from reasonable excuse?

Summary of responses

There were a wide range of strong views raised on the proposals for introducing a criminal offence for failure to notify arrangements under DOTAS. Some respondents thought that criminalising DOTAS was the right option to tackle promoters of tax avoidance. One respondent said “…this is a necessary step,” and “…disregarding of DOTAS by promoters has been a serious problem”. Other respondents disagreed saying that the nature of the DOTAS regime made it unsuitable to attach a criminal offence to. Some respondents did not support the introduction of an offence at all.

Respondents raised concerns about the potentially wide scope of the criminal offence as proposed in the consultation. Most believed that the offence should be targeted at the minority of advisors who mass market schemes, and that the offence should be restricted to promoters. One respondent stated, “that it should not be a criminal offence where a taxpayer fails to disclose under DOTAS and the disclosure obligation is with the taxpayer due to the application of legal privilege or because the promoter is based outside of the UK”.

Respondents raised concerns that the introduction of a criminal offence may lead to an increased burden on those advisors who take their obligations to consider whether DOTAS applies seriously. Some respondents expressed concern that introducing a criminal offence might lead to an increase in protective disclosures. One respondent made the following analogy: “Advisers would need to undertake more detailed consideration of proposed advice than is currently required, given the serious consequences of possibly giving incorrect advice”.

“This could be likened to the difference in the level of consideration that would be given by somebody weighing up the risk and consequences of walking along the edge of a kerb and falling off vs the risk and consequences of walking along the edge of a cliff and falling off”.

Respondents agreed that a reasonable excuse defence should be available in the event of a criminal offence being introduced for failure to disclose under DOTAS. Some respondents considered that relying on a reasonable excuse defence was an inadequate safeguard for the offence and that there should be stronger criteria for HMRC to seek to prosecute the offence. Respondents did not have particularly strong views about how HMRC might frame reasonable excuse in the legislation.

Overall respondents generally agreed that HMRC needs to take strong action against the promoters of tax avoidance schemes to reflect the harm they cause to the tax system as a whole.

Government response

The government believes that introducing a criminal offence for failure to disclose arrangements under DOTAS will help further deter promoters and provide alternative ways for HMRC to tackle non-compliance with DOTAS. The government proposes that the new offence should have a maximum sentence of an unlimited fine and up to 2 years imprisonment, or both.

The government acknowledges respondents’ views concerning the risk of being prosecuted for inadvertently failing to comply with their obligations to make a disclosure under DOTAS. Any promoter whose inadvertent failure is reasonable (rather than culpable) would have the opportunity to explain this early in the course of any criminal investigation, which could then be promptly closed and discontinued if appropriate. This measure is aimed at cases where disclosure under DOTAS was required and the promoter nonetheless failed, unreasonably and therefore culpably, to make the required disclosure.

The decision to open a criminal investigation would be made in line with HMRC’s existing criminal investigation policy and processes, reserving criminal investigation for the most serious cases, where HMRC needs to send a strong deterrent message or where civil interventions are not effective. The guidance covering this is published on GOV.UK (click here for more details). While HMRC may undertake a criminal investigation, the decision to prosecute would lie with the relevant prosecuting authorities. Ultimately, HMRC would have to prove its case in Court to secure a criminal conviction, and anyone with a reasonable excuse for their breach would be acquitted.

The government agrees that this offence should be targeted towards promoters of avoidance. As such the proposed offence would only apply to failure by a promoter to comply with their obligations under section 308 of Finance Act 2004. The government considers a custodial sentence of up to 2 years would be appropriate, in line with other criminal sanctions for failure to comply with anti-avoidance regimes (such as a Stop Notice).

The government acknowledges and recognises respondent concerns about the breadth of the proposed offence, and how this could drive additional burdens for compliant tax advisers. The government would therefore welcome further engagement with stakeholders on how it could look to narrow the scope of the offence during the draft Finance Bill consultation period.

The government believes that it is also appropriate to introduce a criminal offence that applies to promoters of avoidance relating to VAT and other indirect taxes. The government will therefore introduce an offence for failure to disclose under the Disclosure of Tax Avoidance Schemes: VAT and other Indirect Taxes (DASVOIT) regime.

Updating the DOTAS civil penalty regime

Question 9: Do you agree that moving the issuing of DOTAS penalties from the Tax Tribunal to HMRC (appealable to the Tax Tribunal) is appropriate?

Question 10: Are there any other changes to DOTAS penalties HMRC should consider?

Summary of responses

Respondents were generally supportive of the proposal to allow HMRC to determine civil penalties under the DOTAS regime. Some respondents expressed reservations saying that this change amounted to removal of the Tribunal safeguard. Most respondents believed that this change was sensible as it would bring the DOTAS penalty regime in line with other anti-avoidance legislation such as the POTAS regime. Most respondents also felt the introduction of appeal rights against the penalties raised by HMRC would mean that the Tribunal still provided a safeguard, albeit at a slightly later point in time.

Some respondents believed that current penalties were not high enough given that in some cases the maximum penalty is limited to a daily rate, but the proposed changes would mean HMRC would be able to charge penalties much sooner after the failure happens than is currently possible.

Government response

The government thinks this is an appropriate change and that by introducing the right of appeal to the Tribunal, this maintains appropriate safeguards. This change would bring DOTAS penalties in line with other anti-avoidance regimes and allow HMRC to more quickly issue penalties for DOTAS failures.

The government will keep the DOTAS regime under review including considering if increasing the penalty amounts is necessary.

The government believes that it is also appropriate to amend the DASVOIT regime to allow HMRC to determine penalties in line with the change proposed for DOTAS.

5. Universal Stop Notices and Promoter Action Notices

Overview

The consultation document proposed the introduction of a Universal Stop Notice (USN). Stop notices issued under the current legislation apply only to those promoters and schemes specified in each notice. The USN measure proposes to issue a USN that would apply to all promoters and their arrangements that match the description specified.

It was initially proposed the notices would be issued by publishing them on GOV.UK website to make those involved or promoting, or considering becoming involved in or promoting, tax avoidance aware of the USN. The government has responded to the feedback received and now proposes that the measure provide for HMRC to introduce secondary legislation (regulations) specifying details of the arrangements which may not be promoted. A breach of the USN would attract a range of sanctions which include publication of the promoters’ details, financial penalties, and a criminal sanction which could result in imprisonment of up to 2 years, in line with other criminal sanctions for failure to comply with anti-avoidance regimes (such as a Stop Notice).

The overall response to the USN proposal was mixed. There was support in HMRC developing proportionate and targeted measures to tackle the persistent group of promoters who are causing harm to the UK tax system and taxpayers. However, there were concerns that the USNs would be too broad and could apply to legitimate tax advisers. There were also concerns that advisers would not be aware of the USNs being published on GOV.UK pages. Some respondents indicated the need to have necessary robust safeguards in place to ensure that action taken under the USN measure was proportionate and appropriate.

The consultation also proposed the introduction of a PAN. A PAN would require businesses to stop providing products or services that were being used by promoters. The government recognises that most businesses are unaware their products or services are being used by promoters of marketed tax avoidance, do not wish to be involved and want to maintain high standards of tax compliance. The PAN takes a novel approach by collaboratively working with businesses to disrupt promoters and their access to UK markets. The government’s proposal continues to be that a PAN will not be an indication of wrongdoing.

The overall response to the PAN proposal was mixed. Many respondents recognised the policy rationale for tackling promoters, whilst at the same time expressing concerns around information sharing, the basis for issuing a PAN, administrative burdens, protections for businesses complying with a PAN, and reputational and commercial impacts. Responses also noted there may be legal complexities in complying with PANs in some instances.

The government acknowledges that the PAN proposal will bring additional costs for compliant businesses supplying services used in promotion. Though the government does not envisage using it in many cases, it does envisage that the vast majority of businesses in receipt of a PAN will not know they are supplying a service used in promoting avoidance. The government will continue to engage with stakeholders to explore ways to make this process less burdensome for compliant businesses. The government will ensure that the PAN is practical for businesses to comply with, aligning with its Regulation Action Plan commitment to reduce the administrative burden on businesses by 25%. As part of this, the government will work with industry to ensure the PAN complements existing rules and laws, including liability protections for intermediaries.

In addition, the government is also working with international partners to explore how best to co-operate with other jurisdictions to ensure that the PAN proposals can effectively tackle promoters based offshore. A joint statement has been agreed with the Isle of Man and the government is committed to continuing to progress with its international partners.

Due to the detailed responses received in relation to both of these proposals, the government has decided to split the summaries of responses into individual sub-chapters below. A full list of questions posed for the chapter can be found at Annex B.

Universal Stop Notice

Proportionality

Summary of responses

Responses were varied ranging from the proposals being useful in tackling “many arrangements offered that are clearly operated by the same organisation in the background” to the proposals having an unclear deterrent effect with a significant cost of compliance for legitimate businesses.

Concerns raised included the risk that HMRC would in effect be able to make areas of tax planning illegal with the issue of a USN, and that in doing so they may be legislating with no parliamentary scrutiny. Many felt that the criminal sanctions proposed for breaches were a concerning risk for those who may accidentally breach a notice.

Suggestions were made to increase the proportionality of the measures, including ways which would limit the circumstances in which notices may be issued, as well as the sanctions for breaches (particularly accidental breaches).

Government response

The government is content that the proposals for the USN measure will act suitably as a deterrent to promoters of tax avoidance. The government will ensure that suitable governance and guidance are in place to ensure the measures are targeted on promoters whilst minimising impacts on legitimate businesses. Proposed legislation and guidance will set out the conditions and basis for issuing USNs. Proposed legislation and guidance will set out the conditions and basis for issuing USNs in secondary legislation.

The government also wants to clarify its intention that USNs are aimed at criminalising the promotion of the arrangements that would be described in the USN. This is distinct from criminalising taxpayers choosing to take a position that differs from HMRC’s interpretation of the law with respect to their own affairs, even if promotion of such a position would amount to a breach of a USN.

The government believes that this approach is warranted because of the promoter behaviours it sees, where promotion of schemes continues even though no informed person would think they would succeed on a technical basis. As the government has noted, such schemes sometimes leave taxpayers using the scheme with large, unexpected tax bills as well as late payment interest and, in some cases, penalties. For this reason, the government believes there is a public interest in deterring promotion of such schemes. Tying the offence to the promotion, not the use of arrangements, also makes it clear which activities are within the scope of criminal sanction.

The government remains of the view that the USN proposal strikes an appropriate balance between preserving the freedom of a taxpayer to challenge HMRC’s position on interpreting or applying the statute, while also protecting the tax system and safeguarding taxpayers in general from the opportunistic and disingenuous behaviour that has, for a long while, characterised the behaviour of marketed avoidance promoters.

The government recognises the concerns raised regarding prohibitions on promoting tax avoidance arrangements via notices applying to promoters generally, rather than a specifically named promoter (especially where a criminal offence is attached), and has updated its position on the USN proposal so that the relevant arrangements that are being made unlawful will be set out in regulations. The government believes that this will still achieve the desired effect of the proposal whilst addressing respondents’ concerns over a lack of parliamentary scrutiny.

Targeting and scope

Summary of responses

Most responses indicated that respondents did not feel the USN measure was appropriately targeted and raised the following points:

• the current wording used in Spotlights or Stop Notices may be too broad for use in a USN, leading to increased burdens for tax advisers to ensure they are interpreting the USN correctly to remain compliant. One respondent raised that this burden being applied to all tax advisers is not proportionate to tackling the issue of promoters
• lack of information around the criteria to be used for publishing a USN, and lack of detail around the definition of ‘similar’ arrangements in a USN

Some respondents also included the following suggestions to improve targeting of a USN:

• issue a USN to any individual (including controlling minds) that HMRC have reasonable grounds to believe are involved in promotion of tax avoidance
• issue follow up letters following the publication of a USN
• one respondent stated: “The compliant majority would take comfort in the knowledge that the published USNs only applied to them if they had been notified that a particular one might apply”

Government response

The government recognises the concerns raised by the respondents and is grateful for the suggestions to ensure that the proposed USN measure is targeted in the most effective way whilst having the least impact on legitimate tax advisers.

The government proposes the following to ensure that the USN measure is appropriately targeted:

• the government will set out in legislation the definition of activities such as promoting, marketing, designing etc so these can be linked to the description of the relevant schemes within the USN. Anyone undertaking these activities would be in breach of a USN. The government considers that this will better define scope and understanding and make the USNs more precise
• USNs will be made by regulations

Awareness of Universal Stop Notices

Summary of responses

One respondent said that the requirement to check for USNs would apply to all tax advisers and not just promoters and this would be ‘wholly disproportionate’. In contrast, others stated that it would be reasonable for people involved in these sectors to regularly check for publications and updates in the same way that professionals keep themselves updated with any relevant or necessary changes. For example, one respondent said that it was a reasonable requirement for those providing tax advice to be aware of and regularly check for the publications of USNs “much in the way that financial organisations are expected to check for PEPs as part of anti-money laundering processes”.

Government response

The government intends to issue USNs as regulations set out in secondary legislation which will be available for all to view on legislation.gov.uk. This will be accompanied by press releases, social media announcements and alerts to relevant representative and trade bodies.

Furthermore, HMRC in line with current standard practice would seek to publish guidance on USNs which will outline how they would work. However, the government welcomes any further suggestions on how to raise awareness of the USNs and bring these to the attention to those individuals and organisations who may have an interest.

The government considers that there would be a reasonable expectation that professionals who work in these sectors keep up to date with new powers and existing powers.

Reasonable excuse

Summary of responses

Respondents offered varied views on what should constitute a ‘reasonable excuse,’ with some arguing there should be no strict definition, and that Courts should determine it based on existing case law. Others proposed that documented due diligence, demonstrable compliance efforts, or advice from qualified professionals could qualify, though concerns were raised about misuse of legal advice to avoid accountability.

Suggestions included aligning advice with the Professional Conduct in Relation to Taxation or HMRC’s Standards for Agents and maintaining robust compliance processes. Few addressed how to prevent abuse of the excuse, but those who did emphasised the difficulty with recommendations including evidence-based claims, documented audit trails, and proof of active monitoring to ensure genuine compliance.

Government response

The government recognises the need for a reasonable excuse defence in this offence. It proposes that there should not be a statutory definition of what is a reasonable excuse, to allow the courts to consider the matter in light of all the circumstances of a particular case. The government intends to rely on existing guidance, case law and courts to make decisions around reasonable care or excuse. The draft legislation will, however, set out a list of reasons which would not be considered to be a reasonable excuse for failing to comply with a USN.

Safeguards

Summary of responses

Most highlighted the need to have appropriate and proportionate safeguards and governance processes in place for USNs.

Respondents sought further clarification around the nature of safeguards and appeal mechanisms for promoters in relation for the USN measure. Furthermore, respondents suggested HMRC exploring a fast-track Tribunal process for approving USNs.

Respondents felt that if USNs were not targeted correctly and with strong safeguards there was a risk for bypassing judicial oversight which would be particularly relevant for how the criminal offence is considered.

Government response

The government agrees that there should be appropriate and proportionate safeguards. Robust governance will be in place at key decision points to ensure fairness and proportionality for the USN. For example, USNs will now be issued via regulations and an Authorised Officer will look at all the relevant information to determine if a promoter has breached a USN and will contact the promoter to notify them of that breach. Furthermore, they will decide on the appropriate sanction, and will consider representations by the promoter.

HMRC’s robust governance process will have a number of safeguards for promoters such as the ability to appeal to the tax Tribunal against civil penalties and the measure will include standard criminal offence safeguards.

Criminal prosecutions for USN failures would be reserved for serious cases of non-compliance, where HMRC needs to send a strong deterrent message, or where civil penalties would be ineffective. Any criminal investigation would be subject to HMRC’s governance and oversight for criminal investigations. While HMRC may undertake a criminal investigation, the decision to prosecute would lie with the relevant prosecuting authorities. Ultimately, HMRC would have to prove its case in Court to secure a criminal conviction, and anyone with a reasonable excuse for their breach would be acquitted.

HMRC will be able to update or withdraw USNs by amending regulations in specific circumstances such as a final decision by a tax Tribunal or higher Courts regarding the effectiveness of a set of arrangements.

Sanctions

Summary of responses

The majority of respondents recognised the need for a range of sanctions for breaches of a USN and for these to be proportionate and appropriate. In addition, there was a recognition that criminal sanctions may be necessary for persistent breaches and/or deliberate behaviour. However, there were concerns around criminal sanctions being attached to such a broad power with the risk of legitimate tax advice being inadvertently caught.

Respondents did not put forward any other suggestions on other sanctions or restrictions over and above publication, financial penalties or criminal offences that could be applied to promoters.

Government response

The government recognises the importance of having a range of sanctions that can be deployed across a number of circumstances to ensure that these sanctions are both proportionate and appropriate.

The sanctions that will be used with the USN regime will include publication of the details of the person who has breached the USN, civil financial penalties and a criminal offence. Publication will mirror the current publishing provisions in section 86 of Finance Act 2022, penalties will be largely based on the current Stop Notice regime set out in Schedule 35 to Finance Act 2014 and the criminal offence will mirror the current provisions in the Promoters of Tax Avoidance (POTAS) legislation in section 277A of Finance Act 2014.

Promoter Action Notice

Proportionality

Summary of responses

Responses regarding proportionality and cost were varied ranging from the proposals being useful in tackling ‘many arrangements offered that are clearly operated by the same organisation in the background’ to the proposals having an unclear deterrent effect with a significant cost of compliance for legitimate businesses.

Government response

As with the proposal for the USN, the government believes that the PAN proposal will act as a suitably proportionate deterrent in consideration of the costs of compliance. The government recognises that the proposal may cause businesses to face an additional administrative burden when HMRC take action, but will work with businesses to develop the proposal to minimise this. This will align with its Regulation Action Plan commitment to reduce the administrative burden on businesses by 25%. As part of this, the government will work with industry to ensure the PAN proposal complements existing rules and laws, including existing safeguards.

Application

Summary of responses

There were a range of responses regarding the scope of a PAN. Most respondents stated there should be a ‘clear connection’ between the products or services and the promoter’s activities. One respondent suggested this should be determined in that “without that service, the operation of the scheme would not have been possible”. It was further suggested that the onus for determining this connection should not lie with the business but HMRC.

There was a mixed response to the suggestion in the consultation that legal services should be excluded, with one respondent highlighting that promoters use legal opinion to facilitate promotion, whereas another stated that this should be excluded. Furthermore, some respondents suggested that exclusions should include utilities such as electricity, gas, internet, personal banking (not connected to promotion activities); and any products or services used in a private capacity.

Respondents suggested that the following information would be useful in understanding and complying with the PAN: information on the avoidance scheme, details of the required action, consequences for non-compliance, and details of the persons targeted.

Government response

The government is content that specific products or services do not need to be excluded as the requirement for products or services to be demonstrably ‘connected to the promotion of avoidance’ will act to prevent the proposal being misused. However, where legal advice has been provided this will be out of scope of the PAN measure. The government sets out its proposals for dealing with legal professionals involved in marketed tax avoidance in chapter 7.

It will be necessary for HMRC to demonstrate that products or services are ‘connected to the promotion of avoidance’ and to provide details of the action required of a product or service provider, all of which will ensure appropriate targeting of a PAN.

The government has listened to the concerns of using HMRC’s reasonable suspicion for issuing a PAN requiring businesses to take action to stop providing products and services to the promoter. It is the government’s view that linking the issuing of a PAN to the breach of a Stop Notice or a USN will provide reassurances to business that HMRC has fully considered the activities of the promoter before issuing a PAN. Furthermore, a business will be able to appeal to the tax Tribunal against the issuing of a PAN.

Practical concerns

Summary of responses

Concerns raised for the PAN proposal included:

• the risk that promoters could take legal action against certain businesses, such as banks, where those businesses have complied with a PAN. Those business could also take reputational damage from taking such action against promoters
• challenges around sharing information about customers with HMRC and compliance with existing GDPR obligations
• clarifying which products or services were in scope for a PAN and the need for clear definition around those being ‘connected to’ tax avoidance
• increasing compliance burden and regulation on businesses and need for the PAN proposals to build on existing processes and frameworks
• businesses asked about the impact on commercial contracts and existing provision of products or services
• respondents also raised concerns about the impact on users of arrangements and other third parties who may be affected by things such as account closures or freezes and the ability to receive payments they may be waiting (and relying) on

One respondent said the first contact letter would support legitimate businesses engaging with HMRC, whilst another stated it would serve to put businesses on notice. Respondents were keen to understand how information will be shared (both to and from HMRC) and raised concerns around data protection laws limiting their ability to discuss promoters and their products and services.

The pre-PAN period outlined in the consultation document refers to a period where a business can engage collaboratively to verify and check information, confirm actions needed was welcomed by respondents. They felt that would provide clarity and reduce errors and commercial or reputational risks. Respondents asked about the length of the extension period and the reasons for requesting an extension. Some respondents, especially in the financial services sector, indicated that they would require a formal notice to act against a customer.

With social media/technology respondents, there were the following observations:

• HMRC will need to recognise and work with individual platform’s Terms and Conditions which shape takedown policies and processes
• platforms face restrictions on the ability to deny or restrict user accounts due to conflicting obligations. Account bans also may have limited effectiveness and can be easily circumvented
• there may be challenges around applying UK regulations to overseas platforms and users based overseas. In particular, concerns were raised around restricting or impinging freedom of expression

Government response

The government recognises concerns from respondents that the PAN would be an additional administrative burden for a compliant business. While the government continues to think there is a case for introducing the PAN, it welcomes further engagement with stakeholders on how it can minimise additional burdens on compliant businesses.

The government recognises concerns and the consequences for businesses taking action against a promoter, and the need to clearly demonstrate the basis for taking this action. We recognise that for most businesses a PAN would help the business point to a formal notice from HMRC which is underpinned legislatively.

The government is keen, where possible and appropriate, to use and build on existing frameworks and processes to minimise any impacts or burdens on the business but also to ensure that this does not cause any other impacts. The government will continue to consult further across sectors to clearly establish how the PAN will interact with other areas of law, for example anti-money laundering requirements, or intermediary liability protections.

The government is exploring to what extent there may be a need to include protections for businesses where the promoter takes action against them for example for breach of contract where the business has legally complied with a PAN or a PAN that has subsequently been amended, withdrawn or found to be invalid. It is the government’s policy intent that a business should not be liable for complying with a notice issued by HMRC should that notice later be judged invalid. The government is exploring whether and how this needs to be made clear in the legislation.

The government recognises that there may be commercial implications for the business in receiving a PAN. For example, the government recognises that calling in a loan or mortgage they have made to a promoter business may have an adverse commercial effect on a bank, or there may be impacts on joint bank accounts. This is further addressed in the section headed Application. The government is also exploring mechanisms to permit payments or acts that would otherwise breach the PAN to mitigate the impact on third parties, similar to the exclusion for living or business expenses in Proceeds of Crime Act cases.

The government understands the concern about adverse public comment around ‘debanking’. There is a strong public interest in disrupting the promotion of tax avoidance given the harm it causes both to the UK tax system and taxpayers which needs to be balanced against the individual’s or businesses’ interest in accessing banking facilities. Where there is a formal PAN in place there would be a legal requirement to take action against a customer, for example the removal of services, which would enable a bank to point to that legal obligation.

Safeguards

Summary of responses

The government welcomed views from respondents on safeguards. Most highlighted the need to have appropriate and proportionate safeguards and governance processes in place for the PAN measure.

Respondents sought further clarification around the nature of safeguards and appeal mechanisms for businesses. Furthermore, respondents suggested Tribunal approval for issuing a PAN instead of relying on HMRC authorised officers.

Respondents highlighted several points such as restrictions for businesses appealing a PAN and legal challenges from businesses (in particular banks) given the low threshold of ‘reasonable suspicion’ that HMRC will use for issuing a PAN.

Government response

The government agrees that the PAN should have effective and proportionate safeguards for PAN recipients, especially since receipt of a PAN would not be an indication of wrongdoing.

The proposed PAN legislation will include information sharing provisions which would allow HMRC to exchange and share information with businesses and vice versa, without businesses breaching data protection laws and without requiring HMRC to use formal information powers. The PAN will set out the required action to be taken, and against whom.

The government does not think that Tribunal approval should be necessary for the issue of a PAN given the change to the requirements that must be met for a PAN to be issued — see the government’s response to the section headed Sanctions. An Authorised Officer will be responsible for the key decisions relating to a PAN, including: issuing a pre-PAN letter; issuing a PAN; issuing a notice for failure to comply with a PAN; determining sanctions following a failure to comply; considering representations against sanctions.

Any sanctions following failure to comply with a PAN will not be finalised until any outstanding appeal has been determined, this will prevent HMRC from publishing businesses or reporting them to representative or regulatory bodies prematurely.

The government agrees that extensions to the pre-PAN period may be necessary to allow businesses to act. This will be considered and granted by a HMRC authorised officer. Some examples for additional time could be to arrange meetings with HMRC and consider complex internal systems and processes.

There may be circumstances, for example a decision by the tax Tribunal, where a PAN will need to be withdrawn or amended, or both. The government’s view is that the authorised officer would be able to consider and decide these types of action, and we are exploring the operational mechanisms which would underpin this and how this would work. As raised in the government’s response to the section headed Practical Concerns, the government is also considering appropriate protections for businesses who may have complied with notices prior to amendment or withdrawal of a PAN to ensure that they are not affected by promoters who may seek to take legal action as a result.

There would be no statutory definition of what is a reasonable excuse in relation to the proposed criminal offence for failure to comply with a PAN. This is a matter which would be considered in light of all the circumstances of a particular case. The government intends to rely on existing guidance, case law and Courts to make decisions around reasonable care or excuse. The draft legislation will however set out a list of reasons which would not be considered to be a reasonable excuse for failing to comply with a PAN.

Sanctions

Summary of responses

The government was open-minded about the types of sanctions that should apply if a PAN is not complied with and how they would work. It wanted to invite comment and views from respondents on the types of sanctions that would be necessary, effective and proportionate given the nature of proposals and how they impact several different sectors.

Some respondents expressed a need for clarification on what sanctions there would be, who they would apply to and under what circumstances. On the nature of sanctions, respondents were keen to understand how penalties, if introduced, would be assessed for businesses who do not comply with a PAN, how publication would be used, and asked about which circumstances would attract a criminal offence for non-compliance with a PAN.

In relation to a suggestion that a criminal offence might be appropriate, some agreed it was appropriate. Many respondents suggested that, if there was a need for a criminal offence, this should be for deliberate, wilful, or persistent behaviour or involving complicity between the promoter and the business. Several noted that publication was a very strong sanction for businesses of good repute.

Government response

The government’s view is that the use of sanctions is an important and effective tool, however it recognises these need to be proportionate and appropriate given the nature of the businesses and sectors involved. It recognises that most businesses will endeavour to comply with a PAN, do not want to be involved in the promotion of tax avoidance and maintain high standards of tax compliance.

The government will also continue to assess how the PAN proposal aligns with other obligations across sectors and how the sanctions for these compare. Further input from industry is welcomed during the period of consultation on the draft legislation to appropriately shape the proposal.

The government has considered the proportionality of introducing a criminal offence for failure to comply with a PAN and does not believe that it would be suitable in consideration of sanctions for other obligations on businesses.

Penalties — the government has been exploring the basis for determining the penalties, and what factors could be considered when doing this. The government believes tax geared penalties would be difficult to calculate and would not be proportionate in these circumstances.

The government is considering a ‘fixed’ or ‘up to’ penalty regime and has been exploring what factors may help in determining the quantum. For example, how many days the failure occurred over and how cooperative the business has been with HMRC.

Publication — The government has been exploring the basis for determining the penalties, and what factors could be considered when doing this. The government believes tax geared penalties would be difficult to calculate and would not be proportionate in these circumstances. The government is considering a ‘fixed’ or ‘up to’ penalty regime and has been exploring what factors may help in determining the quantum. For example, how many days the failure occurred over and how cooperative the business has been with HMRC.

Reporting — the government will introduce a new reporting power which seeks to report failures to comply with a PAN to the business’ appropriate representative body and/or regulator. As with publication, any appeal against a PAN will have to be finalised before reporting takes place. If an appeal by the tax Tribunal is rejected, the business can make representations to HMRC before any reporting would occur.

The government considers the existence of the pre-PAN step will help businesses inform HMRC of likely practical challenges to implementing a formal PAN and enable them to work through reasonable timescales with HMRC. This maximises recipients’ ability to comply with the PAN and avoids sanction.

The government recognises the need to uphold the intermediary liability principle and will continue to work with industry and experts to explore the most appropriate way for PAN liability to apply to intermediaries to ensure appropriate protections and alignment across obligations. The government is keen to emphasise that it will not seek to make any entity liable for promoters using their products or services, but will take action where necessary for non-compliance with a PAN. The draft legislation includes a specific exemption to this effect so that intermediaries can be reassured that existing safeguards will be carried over to this proposal.

Other options for businesses

Summary of responses

Respondents indicated that they may look at their existing processes and terms and conditions to see how the PAN could be actioned, and some asked for information to help them identify promoters of tax avoidance so that they can take action.

Respondents posed several suggestions on helping businesses tackle promoters which included strengthening internal audits, due diligence and use of financial crime mechanisms by HMRC.

Government response

The government recognises the challenge for businesses in identifying tax avoidance arrangements so that they can act. HMRC regularly publish details of tax avoidance arrangements and those involved on GOV.UK and businesses are encouraged to check this list to help them take appropriate action.

The government encourages businesses to review their existing terms and conditions, internal audit processes, and due diligence processes and consider how these align with the government’s intention of tackling promoters.

6. Stronger information powers to effectively investigate those who own and control promoter organisations

Overview

The consultation proposed the introduction of a targeted Connected Parties Information Notice (CPIN). The CPIN would compel persons that HMRC suspects to be connected to the promotion of marketed tax avoidance schemes to provide relevant information and documents. HMRC would be able to issue first and third-party information notices to and in respect of ‘connected persons’ to enable it to deploy its anti-avoidance powers more effectively. The proposal is intended to help understand how arrangements operate and identify the persons behind the promoter structures so that action can be taken against them.

The overall response to the CPIN was positive. The majority of respondents recognised the need for a strong information power which would help HMRC gather evidence and tackle persons connected to the promotion of marketed tax avoidance.

The consultation also proposed introducing a Promoter Financial Institution Notice (PFIN) which would require Financial Institutions (FIs) to provide information and documents in relation to promoters of tax avoidance. This proposal would be similar to the existing FIN introduced in Finance Act 2021, however, HMRC would be able to issue a PFIN for a specified purpose that would not need to be for the purpose of checking a tax position as is required for the existing FIN by Finance Act 2008. The proposal would allow HMRC to more quickly identify avoidance arrangements and those connected to or behind them, better identify undeclared amounts that should be subject to tax, identify breaches of new or existing anti-avoidance legislation, and better target the issue of a PAN should the proposal be introduced.

The main concern expressed by some respondents about the PFIN proposal was the lack of Tribunal oversight of the process. This is an area in which the government’s thinking has evolved and has set out further below.

In addition, the government is also working with international partners to explore how best to co-operate with other jurisdictions to ensure that the PFIN and CPIN proposals can effectively tackle promoters based offshore. A joint statement has been agreed with the Isle of Man and the government is committed to continuing to progress with its international partners.

Connected Parties Information Notice (CPIN)

Question 33: Do you have any views on who should or should not be covered by the CPIN proposal?

Summary of responses

There was general support for the proposed new information power. The majority of respondents agreed that CPIN’s scope needs to cover connected persons in the promoter chain but stressed the importance of the power being appropriately targeted. Some respondents expressed a concern about casting the net too wide, particularly around persons who have benefitted from the promoter’s proceeds.

Some respondents suggested including material subject to legal professional privilege and other excluded material within the scope of information HMRC can request to prevent attempts to put controlling minds beyond the reach of a CPIN. Others, however, felt that information subject to legal professional privilege should be protected.

Government response

The government agrees that CPIN’s scope should be appropriately targeted while being wide enough to cover persons connected to the promotion who may hold information relevant to HMRC’s anti-avoidance investigations.

The intention is that the definition of a ‘connected person’ would be based on the well-established definition under section 86 of Finance Act 2022. The government is of the view that the definition achieves the right balance of targeting persons connected to the promotion of tax avoidance while protecting individuals and businesses not affiliated to the promotion.

The government’s position is that issuing a CPIN should be based on a reasonable suspicion that a party is a ‘connected person’. This is necessary as one of the aims of the proposed power is to help HMRC identify and confirm the involvement of the controlling minds behind the promotion of schemes.

The government recognises that persons in the promoter chain may attempt to sidestep CPIN requests by claiming that a document is subject to legal professional privilege where there is not a good reason to do so. The government intends to mirror the existing approach to LPP dispute resolution under Schedule 36 Finance Act 2008.

Question 34: Do you agree that a criminal offence should be a potential consequence for failure to comply with a CPIN or providing false or misleading information?

Question 35: Do you have any views on how to set civil penalties at a level which would encourage compliance from parties connected to the promotion of marketed tax avoidance schemes?

Summary of responses

There was some support for introducing criminal offences for failure to comply with a CPIN without a reasonable excuse, providing false or misleading information and concealing, destroying or otherwise disposing of documents requested in a CPIN. Some felt that criminal sanctions should be reserved for those that have knowingly failed to comply or only in circumstances where a notice had been issued with prior Tribunal approval.

The majority of respondents were in favour of CPIN having high civil financial penalties to incentivise compliance from persons connected to the promotion of tax avoidance. One respondent suggested basing penalties on those in Schedule 36 Finance Act 2008 and Schedule 20 Finance Act 2016. Another felt that penalties should reflect the level of connection of the parties and the person’s role in promoting avoidance schemes.

Concerns were raised around offshore promoters and the enforcement difficulties HMRC face where a person is based offshore.

Government response

The government agrees that failure to comply with a CPIN should have strong consequences. This would provide a deterrent across the avoidance market and a strong incentive for persons connected to the promotion to comply.

The proposed information power is intended to help HMRC deploy and monitor compliance with anti-avoidance powers and identify the persons behind avoidance schemes who undermine our tax system and deprive public services of the funding they need. It is therefore important for recipients to comply, irrespective of whether HMRC has issued the notice with or without prior Tribunal approval. The government’s view is that where a person fails to comply with a CPIN without a reasonable excuse, destroys or conceals documents or misleads HMRC, a criminal sanction should be a possible consequence.

Criminal prosecutions for CPIN failures would be reserved for serious cases of non-compliance, where HMRC needs to send a strong deterrent message, or where civil penalties would be ineffective. Any criminal investigation would be subject to HMRC’s governance and oversight for criminal investigations. The guidance covering this is published on GOV.UK (click here for more details). While HMRC may undertake a criminal investigation, the decision to prosecute would lie with the relevant prosecuting authorities. Ultimately, HMRC would have to prove its case in Court to secure a criminal conviction, and anyone with a reasonable excuse for their breach would be acquitted.

The government recognises that addressing offshore promoters is a challenge. The intention is that the legislation would operate on the basis that HMRC would have the ability to issue CPINs to people or entities who are not resident in the UK. The proposed information power would make it easier for HMRC to evidence the offshore activities of promoters. We work very closely with other jurisdictions to tackle promoters through UK’s wide network of tax treaties.

Question 36: Do you have any suggestions for alternative or additional proportionate potential consequences for non-compliance with a CPIN?

Summary of responses

Respondents had the following suggestions: * disqualification from holding directorships, particularly in regulated sectors * restrictions on future business activities, including: * prohibition from operating umbrella companies * bans on acting as a promoter or enabler of tax schemes * exclusion from public sector procurement frameworks, preventing non-compliant businesses from supplying services to government-funded bodies * restriction on indemnities and invalidating insurance * in cases involving complex or layered business structures, controlling minds being liable for offences even where there is no direct legal link to the umbrella company, provided there is clear evidence of control or orchestration

Government response

The government welcomes these suggestions and will consider whether they can be implemented in an effective and proportionate way.

Question 37: Do you agree that these safeguards provide the right level of protection for recipients of the notice? If not, what additional safeguards could be introduced?

Question 38: Are the safeguards for this measure likely to be effective? If not, please state what could be done to enhance them.

Summary of responses

CPIN would largely replicate the well-established safeguards under Schedule 36 Finance Act 2008. The majority of respondents were supportive of this approach and agreed that the proposed safeguards would provide the right level of protection. Three respondents felt that the power should not mirror the Schedule 36 process for making representations for Tribunal approved notices. They suggested that HMRC should be required to give a person’s full representations to the FTT before a hearing or alternatively, that the recipient of a CPIN should be given the ability to submit representations directly to the FTT.

Some respondents felt that what constitutes a ‘reasonable excuse’ should be clearly defined in legislation.

Government response

The government’s view is that the proposed safeguards achieve the right balance of providing protection for the recipients of a CPIN and ensuring HMRC can effectively use this power.

Additionally, HMRC will ensure that there are robust governance processes in place for issuing CPINs. This would include an officer of a senior grade reviewing a decision to issue a CPIN.

The government’s view is that HMRC should have the option of issuing notices with or without Tribunal approval based on the specific circumstances of a case. This would be balanced by safeguards which would mirror those in Schedule 36 Finance Act 2008. Where a CPIN is issued by an officer of HMRC without prior Tribunal approval, the recipient would have the ability to appeal the notice to the independent Tax Tribunal. Third parties would also be able to appeal against a CPIN issued without prior Tribunal approval on the grounds that it would be unduly onerous to comply with the notice. Where a CPIN is issued with prior Tribunal approval, there would be no grounds of appeal. The recipient would have the option of requesting a judicial review.

The government proposes there would be no statutory definition of what is a reasonable excuse. This is a matter which would be considered in light of all the circumstances of a particular case. The government intends to rely on existing guidance, case law and Courts to make decisions around reasonable care or excuse. The draft legislation will however set out a list of reasons which would not be considered to be a reasonable excuse for failing to comply with a CPIN.

Promoter Financial Institution Notice (PFIN)

Question 39: What are your views on extending obligations under information powers as indicated by the PFIN proposal?

Summary of responses

Most respondents were receptive to proposals provided there is Tribunal oversight of the process. Concerns were raised about the possibility of PFINs being issued and subsequently being ruled unlawful, potentially exposing financial institutions to challenge by promoters for disclosing their information without lawful authority. Most respondents supported being able to obtain more information to tackle promoters, provided the PFIN was appropriately limited to the target and is directly limited to the specific matter under investigation, without disproportionate impacts on the wider tax advice market and financial institutions.

Government response

The government welcomes the support among many respondents for its proposal here and recognises the importance of appropriate safeguards.

The government initially proposed safeguards in line with the current process for FINs, introduced in Finance Act 2021. The government now proposes that HMRC should require Tribunal approval to issue a PFIN.

The existing FIN process allows HMRC to apply to the Tribunal to disapply the obligation to notify the taxpayer that a FIN has been issued and the reasons for it where this is likely to prejudice the assessment or collection of tax. This is to prevent ‘tipping off’ a non-compliant taxpayer about the direction of HMRC’s investigation in relevant circumstances. In the vast majority of the use cases the government envisages for using a PFIN, it envisages HMRC wishing to apply to the Tribunal to prevent ‘tipping off’ in this way.

Therefore, in the government’s original proposal, the vast majority of envisaged use cases for the PFIN would have required HMRC to approach the Tribunal anyway. The government recognises that it could apply an additional safeguard for taxpayers here without unduly slowing down HMRC action against promoters, and parties connected to the promotion of avoidance, in the vast majority of cases. It is grateful to those respondents who pointed this out and helped the government refine its proposal.

Question 40: Are issues envisaged around defining FIs? — For example, in relation to alternative ‘payment platforms. How might HMRC overcome such problems?

Summary of responses

One respondent suggested that there should be clear definitions and guidelines around alternative payment platforms. Another respondent could not see why existing definitions of FIs could not be used and HMRC should collaborate with industry experts to ensure comprehensive coverage. Some respondents exercised caution because not all FIs are licensed and covered by banking regulations.

Government response

The government agrees with the suggestion that the current definition of FIs should be used. The definition of FIs is changing from 1 January 2026 to include entities that hold Specified Electronic Money Products or Central Bank Digital Currencies for the benefit of customers. The government will continue to liaise with industry experts to ensure that relevant payment platforms remain in scope.

Question 41: Should this power be subject to any additional restrictions or safeguards? If so, please state the restrictions or safeguards.

Summary of responses

One respondent said there should be additional restrictions and safeguards to ensure the power is applied proportionately, transparently and in appropriate circumstances. This should be overseen by an independent review process with clear usage of the power guidelines and thresholds. The respondent also felt that the power should only be used when there was significant tax at stake. Another respondent suggested that the FI should have a right of appeal against the issue of the PFIN.

Government response

As set out in response to question 39, the government now proposes an extra layer of Tribunal oversight to allay concerns, with HMRC only able to issue PFINs with Tribunal approval. While the government wants to ensure that HMRC is not unduly hindered in proceeding quickly against promoters, and parties connected to the promotion of avoidance, it considers that this additional safeguard will not significantly slow down HMRC action.

Question 41: Should this power be subject to any additional restrictions or safeguards? If so, please state the restrictions or safeguards

Summary of responses

One respondent said there should be additional restrictions and safeguards to ensure the power is applied proportionately, transparently and in appropriate circumstances. This should be overseen by an independent review process with clear usage of the power guidelines and thresholds. The respondent also felt that the power should only be used when there was significant tax at stake. Another respondent suggested that the FI should have a right of appeal against the issue of the PFIN.

Government response

As set out in para 5.2, the government now proposes an extra layer of Tribunal oversight to allay concerns, with HMRC only able to issue PFINs with Tribunal approval. While the government wants to ensure that HMRC is not unduly hindered in proceeding quickly against promoters, it considers that this additional safeguard will not significantly slow down HMRC action.

In addition, the government proposes an appeal process built into the PFIN process, which matches the FIN process safeguard where the FI is charged a penalty for not complying with HMRC’s requests not to notify the promoter.

Question 42: Do you have any other ideas for options that could deliver both the objective of speeding up the process for obtaining promoters’ financial information and providing appropriate safeguards?

Summary of responses

There were 3 responses to this question. One suggested a dedicated task force to deal with financial data. The other 2 suggested an accredited compliance list and HMRC sharing intelligence to other bodies and organisations.

Government response

The government will give these suggestions careful consideration when ideas for future measures are being reviewed.

Question 43: Do you have any views on the requirement described above that aims to prevent the third party from notifying the promoter of the information request as described? Do you have any suggestions about any other ways that this aim could be achieved?

Summary of responses

Respondents in general acknowledged the reasons for not tipping off the promoter and they also acknowledged the importance of the 12-month time limit for not notifying the promoter and the sanctions for not complying. However, one respondent representing a large group within the banking industry was concerned about the PFIN secrecy.

Another mentioned that FIs will need clear guidance if that time is to be extended and/or other banking authority obligations such as the Anti Money Laundering Regulations and Suspicious Activity Reports (SARs) were to come into play. Entities may also be disproportionately impacted if businesses are sold, become insolvent or are no longer promoting. In terms of other ways of achieving confidentiality, other than penalties for breach, one respondent suggested the drawing up of confidentiality agreements, exclusion from public sector contracts, securing communication protocols and alignment with other breaches.

Government response

The government recognises that, in general, FI’s cooperate with HMRC’s requests and there is no reason to believe that this would not continue to be the case with PFINs, which would match the current FIN process where other FI obligations and changes in an individual’s circumstances already come into play. The process around confidentiality and breaches generally will be kept under review

7. Legal professionals

Overview

The consultation proposed legislative and non-legislative proposals to take action against the small number of legal professionals involved in the design and promotion of tax avoidance schemes.

The legislative proposals were: * changes to the DOTAS regime in relation to legal professionals * changes to HMRC’s publishing powers to allow HMRC to publish details of legal professionals who design tax avoidance schemes * legal Professional Privilege (LPP) waiver in respect of promoters who utilise legal opinions to market schemes

The non-legislative proposals included in the consultation were: * engaging with the legal sector * making clear HMRC’s position on when LPP does not apply

Many respondents raised concerns about the potential impacts of the proposals on the wider legal profession, and on individuals seeking appropriate advice. They also highlighted the importance of making full use of existing powers to sanction legal professionals, acknowledging that while some existing powers may be difficult to use, this was felt to reflect the seriousness of such an offence.

Respondents raised repeatedly that LPP is a fundamental right, and ‘a cornerstone of the rule of law’, in opposing the suggestion of a deemed waiver of LPP. LPP underpins how legal advice is sought, and the entirety of the legal professional market. Views on LPP and the role of legal professionals also shaped responses to the other measures targeted at legal professionals.

At present, the government does not intend to pursue a waiver of LPP, or any changes to DOTAS Regulation 6. The government intends to amend rules for publishing details of schemes and those involved in promoting them to bring more legal professionals into scope, while ensuring appropriate safeguards to minimise impact on legitimate legal advice. The government considers that the proposed changes, coupled with other measures in this package, will tackle the behaviours of the small number of legal professionals targeted, whilst opening up further avenues to test claims to LPP, and to engage further with the legal sector.

The government is grateful to the respondents who worked openly with officials to consider these proposals, and particularly to the regulatory bodies for their early engagement in exploring alternative ways to target the small number of legal professionals concerned.

Disclosure of avoidance scheme by legal professionals who promote tax avoidance schemes

Question 44: Should Regulation 6 be repealed?

Question 45: Are there any risks in making such a change? For example, could the change bring into scope those that we might not wish to include?

Question 46: Does the government’s proposal to retain the statutory protection for LPP material in primary legislation provide an adequate safeguard?

Summary of responses

Most respondents did not comment in detail on the potential repeal of Regulation 6 (part of DOTAS Regulations), and there were few objections to the repeal.

A few respondents thought the repeal of Regulation 6 would create uncertainty or bring additional persons into scope unintentionally. Respondents highlighted that Regulation 6 provides clarity on the duties of a legal professional and balances LPP with DOTAS disclosure obligations.

While some respondents agreed with the aim to bring further legal professionals into scope for undertaking DOTAS obligations (subject to other DOTAS criteria), concerns were raised about potential conflicts for legal professionals between LPP and the risk of criminal prosecution for non-disclosure.

Respondents also highlighted the minor impact of changes, as the repeal of Regulation 6 would change who was considered a promoter for DOTAS but would not remove the restriction on disclosing information covered by privilege.

Some respondents felt that if Regulation 6 was repealed, it would be important to explore other safeguards, to protect legal professionals when their views differed to HMRC’s, or to require a link with marketed avoidance.

Government response

The government no longer proposes to pursue the repeal of Regulation 6.

The government agrees with points raised in response to the consultation that the changes would bring few additional legal professionals within DOTAS, given that many legal professionals are already within the scope of DOTAS under other sections. Changes already made to the legislation in Finance Act 2021 mean that some legal professionals will come in scope for DOTAS as ‘persons involved in the supply’ of arrangements/proposed arrangements. These persons must be notified of the allocation of a Scheme Reference Number, may be required to provide information or documents about the arrangements/proposed arrangements, and may have their details published under s316C Finance Act 2004.

The government notes concern about the impacts of removing Regulation 6 on other parts of DOTAS (and DASVOIT), and the need to retain safeguards.

The government considers that other measures in this package and ongoing engagement with the legal sector will ensure that legal professionals are suitably held to account where they do not operate within the usual bounds of providing legal advice.

Publishing the names of legal professionals who design tax avoidance schemes

Question 47: Should the rules on publishing be changed to allow HMRC to publish the names of legal professionals that design tax avoidance schemes, even when most of or all their activity is subject to legal professional privilege?

Question 49: If the government does change the rules, as per question 47, how should HMRC utilise this information to assist taxpayers and representative bodies?

Summary of responses

Respondents on this measure were generally from the legal or advisory sectors, and were fairly split over this proposal:

• around two-thirds of respondents were in favour of ensuring that legal professionals are held to a high standard and are not removed from obligations and potential implications for acting in relation to avoidance schemes. Many of these respondents highlighted practical considerations to be overcome
• the remaining third highlighted concerns (see below) about the expansion of HMRC’s powers, and the impact of changes on the advisory market

Overall, respondents appreciated that this change aims to tackle only a small group of people: legal professionals whose involvement in schemes is limited to activities covered by LPP, and do not fall into current publishing remit. Broadly, this will cover those who are only involved in designing avoidance schemes.

Respondents recognised the merit of publishing the names of those legal professionals involved in avoidance schemes, to better inform the public about their activities. Many respondents also commented on the need for HMRC to work together with representative bodies and other parties, and to make full use of existing powers.

Government response

HMRC already has powers to publish details of legal professionals involved in tax avoidance schemes under certain circumstances, and the government sees the proposed changes to these rules as a logical step in tackling the small minority of legal professionals who currently fall outside of these rules.

While some concerns have been raised, the government considers that the role of publication is one of education and of protecting the public revenue. It is therefore appropriate that the names of legal professionals can be shared with the public, even where these individuals provide all their input into tax avoidance in contexts covered by LPP, provided other conditions are met.

Question 48: Could there be any unintended consequences from making this change?

Question 50: How should we deal with the issue of representations against publishing the details of a legal professional who has designed a scheme when LPP applies?

Summary of responses

Many of the concerns raised in relation to this measure related to Q50: respondents flagged that the consultation for s86 Finance Act 2022 identified concerns about LPP limiting a legal professional’s defence against potential publication. Some respondents highlighted that a legal professional may not even be able to acknowledge that advice was given.

Some respondents commented on the need to ensure that this proposal is sufficiently targeted. For instance, respondents were concerned that changes should not catch those whose advice had been given properly but used inappropriately by promoters, such as where comments were taken out of context. Some respondents highlighted the difficulty a legal professional would have in challenging their client in these circumstances.

Concerns were also raised that changing the publication rules might stop people looking to get legal advice, push them to use unregulated advice, undermine trust in the market, and impact on the right to seek legal advice. Some respondents were also concerned that legal professionals across the sector would be worried about doing their job, given concerns about their names being published.

Respondents were concerned about safeguards. A small number of respondents considered the possibility of a declaration similar to that found in the Enablers regime and thought that this might be a reasonable approach. Some respondents felt that a First Tier Tribunal appeal right would be a suitable safeguard — or else a mechanism similar to a closed material hearing in the Court of Protection. Other respondents felt that an important safeguard for legal professionals was an element of knowledge — such as knowingly acting in relation to relevant proposals and arrangements.

Respondents also raised concerns about the erosion of LPP by this measure, which already has multiple exemptions that might be used.

A few respondents questioned whether the change would have any material impact, as LPP might prevent HMRC from gathering sufficient information to pursue the publication of a legal professional.

Government response

The government wishes to ensure that this proposal is properly targeted and would not wish to publish the details of a legal professional erroneously. It is committed to appropriate safeguards to ensure that legal advice can still be sought when needed, and that legal professionals are able to act in confidence when operating within the normal remits of legal advice.

This measure will essentially target legal professionals who give design advice, under LPP, but are not otherwise involved in the proposals/arrangements. Other legal professionals should be within the scope of existing publishing powers.

To provide additional protections for legal professionals where their details are potentially going to be published, where LPP prevents them from making representations in the usual manner, the government proposes to draw on the legislation in relation to Enablers of Defeated Avoidance Schemes at para 44 schedule16 Finance (No2) Act 2017. The government was pleased that this was felt to be a reasonable approach by respondents.

A declaration would ensure that a legal professional could provide a statement, generally to be taken as fact, that their involvement did not extend beyond certain parameters. These parameters would include areas such as the legal professional having insufficient knowledge of the proposals/arrangements, or acting in a non-tax capacity, addressing other concerns raised in responses.

The government appreciates the alternative safeguards suggested by respondents. While further analysis is still ongoing, the government considers that a declaration would provide the necessary safeguard for legal professionals who are prevented from making representations. The government intends to include penalties and/or publication for carelessly or deliberately inaccurate declarations, to aim to prevent their misuse. Other existing regulations, and measures in this package, would also ensure that HMRC can test whether the legal professional’s involvement was properly covered by LPP, to make referrals to regulatory bodies, and to consider potential criminal proceedings for incorrect declarations.

An LLP Waiver in respect of promoters who utilise legal opinions to market schemes

Question 51: Would you support the introduction of a deemed waiver of LPP?

Question 52: In which circumstances should LPP be waived?

Question 53: Could a deemed waiver of LPP have any unintended consequences?

Question 54: If you support a deemed waiver, do you consider that it should be a waiver for all purposes or only limited ones? If the latter, what purposes?

Summary of responses

This proposal has provoked considerable debate from respondents, particularly those in the legal profession, including professional bodies. Overall, respondents understood why the proposal had been made, given concerns about the actions of some legal professionals promoting tax avoidance, or otherwise involved. However, respondents were split about whether the proposal was an appropriate way to tackle this issue.

Many respondents also felt that there was an important distinction to draw between poor advice, advice used badly, and advice that was given badly/unethically.

Responses can be broadly grouped into 3 types, with almost all respondents falling into the second or third types:

• those who were generally in favour
• those who were opposed on principle to restricting LPP
• those who saw overall merit but were concerned about the specifics of the operation

The few respondents who were in favour of the proposal generally felt that it was important to target anybody who was promoting tax avoidance, although some still pointed to strict boundaries/safeguards (such as applying this in criminal cases). It was felt generally that the public may not sufficiently understand avoidance, and that promoters drag more people into schemes by suggesting that they have suitable legal advice. However, this legal advice may be misrepresented or not made available to scheme users.

Respondents noted that the fear of the waiver of LPP may impact the market. Some respondents felt that this was a suitable way to reduce the activities of promoters in the market. Other respondents felt that this would curtail the ability of persons to get suitable legal advice.

Amongst those who were opposed on principle, concerns raised included:

• some felt that this change would be counterproductive, reducing instances where legal advice was used publicly in marketing avoidance schemes, but not stopping the advice itself
• underuse of existing restrictions to LPP, such as the iniquity exception, which already provide opportunities for tackling the type of behaviours targeted by this measure. Respondents did not feel that it was clear that these existing powers were insufficient. Respondents accepted that it can be difficult to evidence some of the existing exceptions — and encouraged HMRC to work with other bodies to use these powers more before taking additional steps
• gradual increase in HMRC and wider government powers, eroding existing rights, and opening the way to further changes in due course
• the erosion of the rights of legal professionals and their clients. LPP is a key right and is protected by law and under the Human Rights Act. Respondents raised concerns about Article 8 of the European Convention on Human Rights (ECHR), the right to privacy. Respondents considered that any changes to LPP should be a last resort, where no other options were available, and all other measures were ineffective
• overall, these respondents felt that the impact on the wider legal profession was disproportionate to the impact of this measure, which aimed to capture only a very small number of legal professionals

Amongst respondents who raised practical concerns about the proposal:

• respondents felt that additional safeguards for applying the waiver should be put in place, perhaps tying the waiver to circumstances such as the allocation of a DOTAS SRN, the failure of a proposal/arrangements at Tribunal, or a GAAR opinion being reached
• some respondents noted that legal professionals have limited recourse to protect themselves, where the client uses the advice in a way that does not properly reflect the legal opinion. They commented on the need to use appropriate gateways to ensure that legal professionals would not be penalised for the promoter misrepresenting their advice
• other respondents highlighted difficulty in tying a waiver of LPP to ‘marketing’ of schemes and commented on ways to define marketing
• there were also concerns about instances where HMRC’s understanding of the advice was not complete/correct, and how the operational use of any waiver would need to take account of this
• respondents flagged concerns about interaction with the potential criminal measure for DOTAS, questioning whether, where a deemed waiver of LPP meant that a legal professional was considered a promoter, they would also be open to criminal prosecution
• overall, these respondents were concerned about minimising the impact of the proposal on the wider legal profession

Government response

After further consideration of this proposal and responses, and reflecting on the legal and practical implications of implementing it, the government no longer intends to pursue this proposal at this time.

The government remains committed to considering all possible avenues to close in on promoters of tax avoidance. The government considers that existing and other new measures will help to achieve many of the aims that were put forward in this proposal. Amendments to publishing regimes, and the introduction of the CPIN will provide HMRC with ways to tackle legal professionals acting in relation to proposals/arrangements, to challenge potentially unfounded claims to LPP, and to feed into education and sharing with regulatory bodies.

The government acknowledges that there is an appetite for taking appropriate action in relation to rogue legal professionals, provided that there are suitable safeguards in place. The government thanks respondents for raising ideas for how to ensure that only the small number of legal professionals intended to be targeted are caught by this measure. However, the government considers that to apply a deemed waiver of LPP only where a GAAR opinion or Tribunal decision had been reached would be of little beneficial effect to tackling promoters, as it would come so late in the enquiry process.

The government also notes the significance of the concerns raised about the consistency of this policy with common law principles and the ECHR, and the importance of LPP as a right. The government acknowledges how fundamental these rights are and their role in shaping the operation of the legal market. These concerns will be useful in shaping the direction of future policy consideration the government may wish to give to this area.

Question 55: Are there other things HMRC should do to address instances where promoters rely on dubious legal advice to market avoidance schemes, or use legal advice to market avoidance schemes to persons to whom the advice was not given?

Summary of responses

Various comments were raised around HMRC making suitable and adequate use of existing provisions to tackle promoters. Many respondents felt that they did not have enough idea of what currently happens, where powers do not work, and where they are not used, to be able to comment in any detail on this question.

Overall, respondents felt that it was important to do more to stop dubious legal advice from entering the market. Some respondents suggested financial sanctions should be put in place for rogue legal professionals, although others noted that any further measures would need appropriate safeguards.

Some respondents commented on the need to educate the public about legal advice, LPP, and understanding their rights.

Government response

The government welcomes the suggestions for how further steps can be taken to tackle the avoidance market and help to address this problem. The government is conscious of the importance of ensuring that taxpayers can seek suitable tax advice (including legal advice), and do not want to be seen to be restricting routes to legitimate advice. Support is available to individuals who want to get out of tax avoidance, as set out above at Question 2.

Engagement with the legal sector

No questions were asked regarding the proposal to engage with the legal sector, although multiple respondents commented on the importance of engagement with the sector. HMRC have begun discussions with legal regulators to better understand how HMRC can work with them to tackle marketed tax avoidance.

HMRC has the power under the Commissioners for Revenue and Customs Act 2005 (CRCA) to disclose information where a disclosure would be in the public interest, provided conditions are met. Under these powers, information may be disclosed to a body with regulatory responsibility for a profession, where it relates to misconduct on the part of a member of that profession and to a function of HMRC. As a result, subject to safeguards in published guidance, HMRC can provide regulatory bodies with the information necessary for action to be taken against those involved in the design, promotion, or other activities intended to enable marketed tax avoidance. Further avenues to explore use of these powers are being discussed with the legal sector, who the government wishes to thank for their engagement on this matter.

Making clear HMRC’s position on when LPP does not apply

Question 56: Is there any further action that HMRC should be taking to tackle those legal professionals that are involved in the promotion of tax avoidance?

Summary of responses

Various comments were raised by respondents around HMRC making suitable and adequate use of existing provisions to tackle promoters. This was often raised as an overall comment in response to the consultation, and not only in response to the questions about legal professionals.

Most respondents felt that it would be valuable for HMRC to clarify their views on LPP, although some noted that this was an area that is not governed by HMRC, and thus there would be a limit to the impact of what HMRC could say in this regard.

Representative bodies and other respondents felt that it was important to tackle dubious legal advice — and that more needed to be done in this area. However, it was also recognised that it may not be legal advisors who are undertaking the worst activities in relation to avoidance. Indeed, sound advice might be provided, but the facts provided to back it up might be incomplete, or the use of the advice might be dubious.

Government response

The government is committed to using the powers that already exist, and those that it recommends building on following this consultation, to tackle legal professionals involved in the promotion of tax avoidance. For instance, a Court recently found in favour of HMRC’s arguments that the crime fraud exception applied in a case of suspected tax evasion such that material connected with the promotion of the tax scheme in that case did not attract LPP (see here for more details). HMRC challenges those who assert LPP in circumstances where privilege may have been lost through waiver, or never applied due to existing exceptions.

Further measures are under consideration to tackle promoters of tax avoidance, some of which may impact on legal professionals. This is discussed in the ‘Future direction’ section of this response document.

The government intends to build on current guidance in relation to LPP to help educate the public about where it may apply in relation to tax avoidance but recognises the limits of HMRC’s remit in this area.

8. Future direction

Overview

In the consultation, the government laid out potential additional impactful ways to build on the proposals outlined earlier in this document to continue closing in on promoters of tax avoidance.

Understandably, respondents focussed more on the detailed measures in the consultation which meant that responses to the government’s general proposals for going further in clamping down on promoters of tax avoidance schemes were more limited. Respondents’ concerns were mainly in connection with having appropriate safeguards in place, the administrative impact further measures would have on compliant businesses and whether there was a need for such measures while HMRC had so many others levers available.

The government recognises the importance of proportionality and safeguards when considering the introduction of any new offences or lifestyle restrictions. However, the government is determined to remain on the front foot, closing down further avenues for promoting avoidance as soon as possible and legislating where necessary without delay.

Question 57: Are there any existing powers targeted at promoters which could be strengthened with the addition of new criminal offences for non-compliance

Question 58: In what other situations would criminal sanctions be appropriate for undeterred promoters?

Summary of responses

Respondents accepted that criminal sanctions were necessary in cases of persistent non-compliance and marketed avoidance particularly in circumstances where there was no justification for the promoter’s conduct. However, they had strong reservations about further criminal sanctions. Respondents felt that HMRC should use all the tools it has available before introducing more criminal measures in addition to those already proposed.

Government response

While civil penalties will continue to play an important role in deterring non-compliance in the avoidance market, there is a hard core group of persistently non-compliant promoters for whom only the possibility of a criminal sanction will have any deterrent effect. Criminal sanctions increase the risks not only to those front facing promoters, who attract individuals into avoidance, but they also heighten the risk for those controlling minds who direct and ultimately control the promoter structures through which the schemes are sold.

Question 59. What in your view are the type of sanctions that would deliver the aim of significantly disrupting the lifestyles of controlling minds?

Summary of responses

Some respondents had strong objections to lifestyle restrictions at a conceptual level, from a proportionality and effectiveness perspective. They felt these types of sanctions if introduced, should be limited to persistent non-compliance and mass-marketed avoidance, in circumstances where there was no justification for the promoter’s conduct (for example, GAAR-style test).

Government response

The government is determined to land real life consequences on individuals with significant control over promoter structures and will continue to explore ideas in this area.

Question 60: What further changes could be made to DOTAS to capture a wider range of tax avoidance?

Question 61: How can HMRC ensure that it obtains information from third parties in a timely fashion?

Summary of responses

Respondents felt that there was a case for a full review of the DOTAS hallmarks giving consideration to those hallmarks that were insufficient and those that go further than necessary. They also suggested that expanding the scope of DOTAS was unlikely to deliver major change in reporting. They added that the regime was wide reaching and should be used as an early-warning system, rather than as a mechanism for badging and criminalising inappropriate behaviours. They also commented that the impact on compliant businesses and advisers should not be ignored.

No respondents shared thoughts on how HMRC could get more information on promoters in a timely fashion.

Government response

The government’s aim is to make sure that DOTAS continues to have the scope needed to keep up with new arrangements and schemes that are being developed and sold. The majority of avoidance in recent years has been centred around disguised remuneration schemes. However, where there are signs of changes in the avoidance market, the government will if necessary, introduce legislation to update DOTAS to meet these changes head on.

HMRC will work more collaboratively with other government agencies such as Companies House so that new promoter entities are identified as early as possible as well as the controlling minds behind them. The 2 departments will exchange ideas and information to support compliance activity.

Question 62: How best do you think HMRC can use advances in technology including AI to aid its work tackling marketed tax avoidance?

Summary of responses

Respondents said that in general they supported advances in technology and investment in HMRC, but that it should not be regarded by HMRC as a general panacea for bad actor promoters. They added that uses of technology must be proportionate, and that HMRC must respect confidentiality and safeguards in relation to the use of data. Investment in staff and in education was considered to be just as important.

Government response

Advances in technology such as AI provide a real opportunity to speed up HMRC’s risking and compliance functions. Where HMRC uses AI in a way that could impact outcomes we always ensure that results are explainable, there is a ‘human in the loop’ and that it complies with Departmental data protection, security, and AI ethics standards. This means that even when AI is used to support decision-making, decisions are always made by experienced, trained professionals. This approach is assured by our Professional Standards Committee which oversees how HMRC administers the tax system and applies policies in accordance with its values — including drawing on external expertise.

9. Next steps

The government has published draft legislation alongside this response as part of its consultation on the Draft Finance Bill for those proposals that would require primary legislation. The government welcomes further comments from respondents on the detail of the legislation, and especially on areas indicated in this response (such as on how to better target the DOTAS criminal offence).

The government has also published a draft tax information and impact note for those proposals that would require primary legislation. This provides an overview of the proposed legislative changes and the government’s current understanding of the impacts on the economy, businesses, individuals and other areas that they are likely to have if taken forward.

The government anticipates taking decisions on whether to implement these measures, and with what design, at the next fiscal event.

Respondents who wish to submit views or request a meeting should use ca.consultation@hmrc.gov.uk. Please note that the mailbox will not accept emails larger than 10MB. The government welcomes further discussions with respondents on these proposals.

Paper copies of this document in Welsh and alternative formats (large print, audio, or Braille) may be obtained free of charge from the above email address.

When responding please say if you are a business, individual or representative body. In the case of representative bodies please provide information on the number and nature of people you represent.

Finally, the government would like to reiterate its thanks to those who responded to this consultation for their contribution to the development of these proposals and their support for the government’s overall intent for closing in on promoters of marketed tax avoidance.

Annex A: List of stakeholders consulted

These contributed to the consultation either by formal written response or by attending meetings with HMRC.

Acacium Group

Addleshaw Goddard LLP

Anti-Corruption and Responsible Tax All Party Parliamentary Group — several members thereof

Association of British Insurers

Association of Chartered Certified Accountants

Association of Taxation Technicians

Bar Council of England and Wales

Bar Standards Board

BDO

The Chartered Institute of Payroll Professionals

The Chartered Institute of Taxation

The City of London Law Society

Deloitte

DWF Law LLP

Ernst and Young

Financial Conduct Authority

The Freelancer and Contractor Services Association

Grant Thornton

Institute of Chartered Accountants in England and Wales

Institute of Chartered Accountants of Scotland

Insurance Underwriters Association

KPMG

The Law Society of Northern Ireland

The Law Society of Scotland

The Law Society

Legal Services Board

Loan Charge and Taxpayer Fairness All Party Parliamentary Group

London and International Insurance Brokers’ Association

Low Incomes Tax Reform Group

Meta

Moore Kingston Smith LLP

Pension Scams Industry Group

Professional Passport

PWC

Revenue Bar Association

RSM UK Tax and Accounting Limited

Slaughter and May

Society of Licensed Conveyancers

Solicitors Regulation Authority

Tax Aid

Tax Justice UK

Tax Policy Associates

TaxWatch

TikTok

UK Finance

White & Case LLP

In addition to those above, HMRC also engaged with attendees of banking and counter-fraud forums held by HMRC’s Large Business directorate. Attendees included:

• ABN Amro
• Aldermore
• Allied Irish Bank
• ANZ Banking Group
• Bank of China
• Bank of England
• Bank of Ireland
• Bank of Montreal
• Barclays
• BNPP
• BNY Melon
• Canadian Imperial Bank of Commence
• Citigroup
• Close Brothers
• Commerz Bank
• Commonwealth Bank of Australia
• Credit Agricole
• Deutsche Bank
• Deutsche Pfandbriefbank AG
• First Rand
• Goldman Sachs
• Grant Thornton
• HSBC
• ING
• Jefferies
• Jeffries International Limited
• JP Morgan
• Lazard
• LBBW, London Branch
• Lloyds Banking Group
• Mastercard
• MUFG
• N M Rothschild & Sons Limited
• National Australia Bank
• Nationwide
• Nationwide Building Society
• NatWest
• NatWest Group
• Newday
• Paragon Banking Group
• Rabobank London Branch
• Rothschild
• Santander
• Santander UK
• Standard Chartered
• Starling Bank
• Sumitomo Mitsui Banking Corporation
• TSB
• UBS
• UBS AG
• Virgin Money-Clydesdale Bank
• Visa
• Wells Fargo

Annex B: Questions for Chapter 4

The following questions were posed in relation to the Chapter 4 proposals for a Universal Stop Notice (USN) and Promoter Action Notice (PAN):

Question 11. Do you agree that the USN and PAN proposals would help to deter and tackle tax avoidance and that the deterrent effect would be proportionate to the costs of compliance?

Question 12. Do you have any concerns or foresee any practical difficulties with the USN or PAN proposals outlined above?

Question 13. Do you have any alternative suggestions around how businesses would be able to tackle the issue of promoters using their products and/or services?

Question 14. Do you consider that the first contact letter mentioned above would support legitimate businesses to engage with HMRC?

Question 15. Do you think that the USN is appropriately targeted? If not, could you indicate where you see the issues are and how these could be resolved?

Question 16. How reasonable do you think it is for those involved in promoting or enabling tax avoidance to be expected to be aware of a universal stop notice published on GOV.UK and what more could HMRC do to ensure that all those affected by a USN are aware?

Question 17. What reasonable care/excuse arguments would be appropriate? How might these be framed to prevent promoters from abusing these aspects?

Question 18. How should the Government approach defining whether a service or product provided to a suspected promoter is connected to the promotion of avoidance?

Question 19. Should the Government exclude categories of products or services from the scope of the PAN, and if so, what would those be and why?

Question 20. Do you consider that a business would be able to comply with the obligations in a PAN? If not, please explain where you see the difficulties and challenges and what could be done to overcome these.

Question 21. What level and type of information do you consider would a business need to comply with a PAN?

Question 22. Are the safeguards for USNs and PANs likely to be effective? If not, please state what could be done to enhance them.

Question 23. Do you agree that these safeguards provide the right level of protection for those who may face potential criminal prosecution? If not, what additional safeguards could be introduced?

Question 24. Are there any other safeguards that HMRC should consider to ensure the proposed power is only used in appropriate cases?

Question 25. Do you consider the proposed sanctions for a USN are proportionate? If not, what sanctions should be applied in these circumstances?

Question 26. Do you have any suggestions regarding the basis for determining a financial penalty for a USN? What scale of penalty would you consider proportionate?

Question 27. Do you agree that failure to comply with a USN should be a criminal offence? If not, what sanction should there be and how would this deter those that are currently promoting tax avoidance schemes?

Question 28. In addition to publication, financial penalties and criminal offences, are there any other sanctions or restrictions that could be applied to promoters/enablers including those who have control or significant influence over them?

Question 29. Which sanctions do you consider to be proportionate for non-compliance with a PAN?

Question 30. Under which circumstances do you consider that these sanctions should be applied?

Question 31. Where a business fails to comply with a PAN, do you consider they should be named publicly as a consequence?

Question 32: Are there any circumstances where you consider a failure to comply with a PAN should be a criminal offence?