Tax avoiders can already face penalties, but this consultation proposes additional financial costs such as a surcharge and additional reporting requirements on users of multiple schemes that fail.
Serial avoiders use multiple tax avoidance schemes at the same time – whether using the same avoidance scheme in more than one year, or using different avoidance schemes – to avoid significant amounts of tax.
The consultation also considers whether, and how, to introduce additional penalties for cases where the General Anti-Abuse Rule (GAAR) applies. The GAAR counters the most abusive avoidance.
The Financial Secretary to the Treasury, David Gauke, said:
The government introduced the Accelerated Payments regime last year to fundamentally reduce the incentive to engage in tax avoidance.
HMRC has already issued notices worth over £1 billion, requiring avoidance scheme users to pay their tax upfront, like the vast majority of taxpayers.
Today, we are proposing further action, such as penalties, to tackle the small hard-core group of people who repeatedly use avoidance schemes.
Our message is clear: it is time to get out of avoidance and start paying your fair share.
The consultation follows the announcement by the Chancellor last December that the government would consult on potential sanctions for repeat users of known avoidance schemes.
As part of the ongoing clampdown on tax avoidance, HMRC has set up the new Serial Avoiders Unit (SAU) which will identify and tackle users of multiple avoidance schemes.
The specialist unit will offer a new hotline service to help people who have used multiple schemes and want to get their tax affairs in order. This will provide a single point of contact within HMRC to facilitate resolution of their tax affairs.
In addition, HMRC has also today published the top ten things that users of multiple schemes need to be aware of.
Jennie Granger, Director General, Enforcement and Compliance, HMRC, said:
HMRC is determined to clamp down on the small number of people who engage in tax avoidance.
As part of this, HMRC is increasing its focus on users of multiple schemes and increasing the level of resource and intensity devoted to tackling these avoiders. I would strongly encourage people to get in touch to settle their affairs and put the past behind them.
The consultation paper is available at https://www.gov.uk/government/consultations/strengthening-sanctions-for-tax-avoidance.
10 things serial avoiders need to be aware of:
HMRC is serious about stopping avoidance: the government is taking unprecedented steps to clamp down on the small minority who try to avoid paying tax that is legally due.
- Other people are getting out of avoidance: increasing numbers of people involved in multiple avoidance schemes are approaching HMRC to settle up so that they can put the past behind them and protect their reputation.
HMRC want to help you to get out of avoidance: HMRC will work with avoiders who demonstrate a commitment to resolving their avoidance arrangements to finalise their tax liability and will provide certainty over payment terms. HMRC has set up a single point of contact to help establish the possible terms for exit from each scheme a serial avoider uses.
HMRC is moving more quickly to tackle serial avoiders: as they close in and increase their focus on this minority, HMRC will look ever more carefully at those who use multiple schemes.
- You are the one who is responsible: even if a promoter or agent has arranged the avoidance scheme for the user, the avoider remains responsible for their own tax affairs and what is put on their tax return. Serial avoiders will personally have to provide HMRC with information and documents regarding their tax affairs.
HMRC has a special unit looking at you: the Serial Avoiders Unit is identifying users of multiple schemes who choose not to approach HMRC to settle their affairs.
- You may personally have to attend meetings with HMRC investigators: HMRC will ask you about your tax affairs and will be checking that they have the full facts about your arrangements.
HMRC will look at all your tax affairs: serial avoiders will be subject to a more co-ordinated approach to challenge and resolve their tax affairs. HMRC will look at your current activity, not just enquiries that are already open. And they will look at all the entities and structures you are connected with, to challenge any avoidance and evasion in all areas of your affairs.
- You may have to pay up front: HMRC will fundamentally reduce the incentive to engage in serial tax avoidance and recover all duties legally due at the earliest opportunity.
Multiple users of schemes may receive Accelerated Payment Notices before other users of a scheme.
- There are heavy sanctions: HMRC will evaluate the behaviour of each serial avoider and this could result in penalties for careless or deliberate behaviour or for any failure to disclose avoidance. Deliberately misleading or concealing information from HMRC could lead to prosecution and criminal conviction.