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Users of failed tax avoidance schemes will face penalties, and government will clamp down on high-risk promoters under proposals put forward in a newly launched consultation.
Following an announcement at budget 2013, the government is consulting on proposals to tackle the behaviour of high-risk promoters of avoidance schemes, including naming high-risk promoters, a range of new information requirements and other associated penalties.
The 2012 consultation highlighted the behaviour of high-risk promoters as a problem for HMRC, tax advisers and representative bodies and this consultation seeks views on proposals to address this.
This consultation will focus on two main issues: tackling the behaviour of high-risk promoters of avoidance schemes and penalties for users of failed avoidance schemes.
One proposal for tackling the behaviour of high-risk promoters is to ‘name and shame’ them. HMRC does not currently have the power to name promoters of avoidance schemes whose behaviour is high-risk; Raising the stakes on tax avoidance consultation looks to give HMRC the power to do so unreservedly.
Naming high-risk promoters will publicly identify them, distinguish them from mainstream tax advisers and make sure that their customers know who they are dealing with.
Other proposals include new information powers so that HMRC gets early information about the avoidance schemes which these high-risk promoters are promoting and penalties of up to £1 million for failing to comply with the information powers.
For avoidance schemes users the stakes could be equally as high. Once a scheme has been defeated in court by HMRC, users of similar avoidance schemes under investigation could be forced to amend their return or face paying a penalty based on the tax avoided.
Aimed at making sure tax avoiders settle their tax liabilities quickly, imposing penalties for failed avoidance schemes will also act as a deterrent.
This will help HMRC clear cases more quickly and will reduce the amount of time spent on litigation.
Exchequer Secretary to the Treasury, David Gauke said:
This government is committed to tackling tax avoidance and the proposals in this consultation will allow HMRC to further close in on the cowboy advisers promoting these high-risk schemes.
HMRC is successful in over 80 per cent of the avoidance cases they take to court so we want to deter taxpayers from using these often unsuccessful schemes and ensure that they pay the tax that is due.
The vast majority of tax advisers are not high-risk and have moved away from selling aggressive avoidance schemes but; there is still a minority that persists in promoting these schemes. We want to make life as difficult as we can for them and demonstrate that there is no tolerance for aggressive tax avoidance.
This stage of the consultation will close on 4 October 2013.