Guidance

Find out about serial tax avoidance and the sanctions that can apply

Published 12 January 2018

© Crown copyright 2018

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This publication is available at https://www.gov.uk/government/publications/find-out-about-serial-tax-avoidance-and-the-sanctions-that-can-apply/find-out-about-serial-tax-avoidance-and-the-sanctions-that-can-apply

Overview

The serial tax avoidance legislation is part of a range of measures to clamp down on tax avoidance, to change the behaviour of those who engage in tax avoidance and to discourage them from using avoidance arrangements in the future.

It imposes a range of sanctions, which can include penalties, on anyone who uses avoidance arrangements to reduce their tax liability, but on which they later have to pay some or all of the tax they tried to avoid.

The legislation in schedule 18 Finance Act 2016 that applies to serial tax avoidance is laid out as follows:

  • paragraph 1 - contents
  • paragraphs 2 to 3 - warning notice and warning period
  • paragraphs 4 to 10 - definitions
  • paragraph 11 - meaning of ‘relevant defeat’ in respect of arrangements and when defeat is to be treated as occurring
  • paragraphs 12 to 16 - conditions to be satisfied for a defeat to be a relevant defeat
  • paragraph 17 - annual information notices
  • paragraph 18 - naming
  • paragraphs 19 to 29 - restriction of reliefs
  • paragraphs 30 to 44 - penalty
  • paragraphs 45 to 53 - groups, associated persons and partnerships
  • paragraphs 54 to 62 - supplemental and definitions
  • paragraphs 63 to 65 - commencement

Who STAR applies to

The legislation does not just apply to persistent avoiders, it can apply to taxpayers who have used only one avoidance arrangement that has been defeated.

It affects all new avoidance arrangements entered into on or after 15 September 2016 and defeated after that date, and may affect existing avoidance arrangements entered into before 15 September 2016 but defeated after 5 April 2017.

Which regimes are included

STAR applies to relevant defeats of arrangements which are covered by the legislative regimes for:

Conditions of entry into STAR

Further information about the conditions can be found in ‘Find out why someone may receive a warning notice for serial tax avoidance’.

Arrangements covered by GAAR, follower notices, DOTAS, DASVOIT and VADR are referred to in this guidance as ‘avoidance arrangements’.

For VAT and other indirect taxes, this guidance refers primarily to the DASVOIT regime in schedule 17 Finance (No. 2) Act 2017.

Definitions and terms used

In defining what constitutes a relevant defeat of an avoidance arrangement for its purposes, STAR draws on the existing regimes for:

  • DOTAS
  • the GAAR
  • follower notices
  • DASVOIT

This guidance frequently refers to the existing guidance on DOTAS, the GAAR, follower notices (except partnerships), and DASVOIT in Notice 799.

There’s also guidance published on partnership follower notices, which is not specifically referred to in this guidance.

STAR introduces some basic concepts and definitions:

  • annual information notices – these must be submitted (normally annually) for each reporting period in the warning period and provide details of any disclosure of tax avoidance schemes (DOTAS) arrangements or disclosable VAT or other indirect tax arrangements that the taxpayer has used in the relevant reporting period
  • arrangements – STAR uses the term ‘arrangements‘ rather than ‘schemes’, so this guidance uses the term arrangements to tie in with STAR terminology, except where the meaning is clearer when using ‘scheme’ instead
  • ‘Commissioners’ means the Commissioners for HMRC
  • ‘defeated’ means that the tax position has been resolved on the basis that all or part of the tax advantage sought from the arrangements does not arise
  • ‘disclosable VAT and other indirect tax arrangements’ have the meaning given at Disclosable VAT and other indirect tax arrangements
  • ‘DOTAS arrangements’ have the meaning given at DOTAS arrangements
  • ‘existing arrangements’ or ‘existing avoidance arrangements’ means arrangements entered into before 15 September 2016
  • ‘new arrangements’ or ‘new avoidance arrangements’ means arrangements entered into on or after 15 September 2016
  • relevant defeat - the trigger point for sanctions is when a tax advantage sought by the use of avoidance arrangements is finally counteracted and any amounts arising can no longer be varied, on appeal or otherwise - the term is ‘relevant defeat’ as it refers to the defeat of the particular avoidance arrangements under consideration
  • serial tax avoidance regime (STAR) means the regime introduced by the serial tax avoidance legislation in schedule 18 to the Finance Act 2016
  • used - STAR contains rules to determine when arrangements which have been defeated are to be treated as having been used, which will be relevant in determining in which warning period (if any) the defeated arrangements were used for the purposes of determining the level of penalties, whether the restriction on access to direct tax reliefs applies and whether a taxpayer can be named - arrangements are not treated as used when those arrangements are actually entered into but when:
  • a return is filed
  • a claim or election is filed or made
  • there is a failure to comply with an obligation
  • warning notice - a person enters STAR when an avoidance arrangement they used is defeated and a warning notice is issued
  • warning period - lasts for 5 years from the date of the warning notice but may be extended
  • when arrangements are ‘used’ means a time which is different to the time when the arrangements were entered into

‘Tax’ definitions

Under paragraph 4 schedule 18 Finance Act 2016, the taxes covered by the word ‘tax’ are:

  • Annual Tax on Enveloped Dwellings
  • Apprenticeship Levy
  • Capital Gains Tax
  • Corporation Tax, including any amount chargeable as if it were Corporation Tax or treated as if it were Corporation Tax
  • Diverted Profits Tax
  • Income Tax
  • Inheritance Tax
  • National Insurance contributions
  • Petroleum Revenue Tax
  • Stamp Duty Land Tax
  • VAT and indirect taxes

Indirect taxes

Indirect taxes are:

  • Air Passenger Duty
  • Aggregates Levy
  • Bingo Duty
  • Climate Change Levy
  • customs duties
  • duties on spirits, beer, wine, made-wine and cider
  • Gaming Duty
  • General Betting Duty
  • Hydrocarbon oils Duty
  • Insurance Premium Tax
  • Landfill Tax
  • Lottery Duty
  • Machine Games Duty
  • Pool Betting Duty
  • Remote Gaming Duty
  • Soft Drinks Industry Levy
  • tobacco products duty

National Insurance contributions assessments and decisions

STAR refers to ‘assessments’, but National Insurance is assessed using ‘decisions’ instead of ‘assessments’.

To make sure that STAR correctly covers National Insurance contributions, paragraph 57 part 7 schedule 18 Finance Act 2016 says that:

‘Relevant contributions’ include Class 1, 1A, 1B, and Class 2 contributions (the latter only for contributions relating to the periods up to 5 April 2015).

Class 2 contributions will be abolished from 6 April 2019 and those relating to the period from 6 April 2015 to 5 April 2019 are to be treated for most tax purposes, including STAR, as if they were Income Tax (schedule 11A Social Security Contributions and Benefits Act 1992).

Tax advantage

‘Tax advantage’ is used in determining when a relevant defeat is incurred, which is the event that triggers entry into STAR and other sanctions which may be relevant under STAR.

A relevant defeat of avoidance arrangements happens when a counteraction of the tax advantage arising from those avoidance arrangements becomes final. Tax advantage is intended to have a very wide meaning.

VAT - tax advantage and non-deductible tax

Under paragraph 5 schedule 18 Finance Act 2016, a tax advantage for VAT can be obtained by a taxable person, (that is a person who is registered for VAT or should be registered for VAT), or a person who is not a taxable person.

The definitions of tax advantage and non-deductible tax for VAT are the same as in the VAT legislation (paragraphs 2 and 2A schedule 11A Value Added Tax Act (VATA) 1994).

VAT - tax advantage

Under paragraph 5 schedule 18 Finance Act 2016, a taxable person obtains a tax advantage if any of the following applies:

  • they account for a lower net amount of VAT than would otherwise be the case
  • they obtain a VAT credit when they would not otherwise do so, or obtain a larger VAT credit or a VAT credit earlier than would otherwise be the case
  • they recover input tax before the supplier has to account for the corresponding output tax, and the period between the 2 events is longer than would otherwise be the case
  • the amount of the person’s non-deductible VAT is less than would otherwise be the case

A person who is not a taxable person obtains a tax advantage if the amount of their non-refundable tax is less than it would otherwise be.

Non-refundable tax of such a person means VAT :

  • on the supply to the person of goods or services
  • on goods that the person acquires from another member state
  • paid or due on the importation of goods from outside the member states

For DASVOIT disclosable arrangements a tax advantage for VAT also includes a person avoiding an obligation to account for VAT (see paragraph 8A(3)(B), schedule 18 Finance Act 2016).

Non-deductible VAT

Under paragraph 6 schedule 18 Finance Act 2016, VAT is non-deductible VAT for a taxable person when one of the following applies:

  • it is input tax, but for which that person is not entitled to credit
  • it is incurred by that person but is not input tax and that person is not entitled to a refund in respect of it under the VAT Act 1994

VAT is incurred by a taxable person where it is:

  • on the supply to the person of goods or services
  • on goods that person acquires from another member state
  • due on the importation of goods from outside the member states

Other taxes

Under paragraph 7 schedule 18 Finance Act 2016, the definition of tax advantage for taxes other than VAT is based on the definition of tax advantage in the DOTAS rules (section 318 Finance Act 2004).

Tax advantage for non VAT purposes includes:

  • relief or increased relief from tax
  • repayment or increased repayment of tax
  • receipt, or advancement of a receipt, of a tax credit
  • avoidance or reduction of a charge to tax or an assessment of tax or a liability to pay tax
  • avoidance of a possible assessment to tax or liability to pay tax
  • deferral of a payment of tax or advancement of a repayment of tax
  • avoidance of an obligation to deduct or account for tax

References above to an assessment to tax include a determination in relation to Inheritance Tax and a National Insurance contributions decision relating to a person’s liability for relevant National Insurance contributions (Class 1, 1A and 1B contributions and in certain cases, Class 2 National Insurance contributions.

Any such tax advantage must relate to direct taxes or one or more of the indirect taxes (other than VAT). This definition of tax advantage (not including the receipt, or advancement of a receipt, of tax credits) applies to direct taxes and indirect taxes (other than VAT).

Relevant defeats

Under paragraphs 11, 63 and 64 of schedule 18 Finance Act 2016, a person incurs a relevant defeat in relation to arrangements if any of conditions A to F are met in relation to the person and the arrangements:

  • Condition A covers the GAAR
  • Condition B covers follower notices
  • Condition C covers DOTAS arrangements
  • Condition D covers disclosable VAT arrangements where the arrangements relate to the user’s tax position
  • Condition E covers disclosable VAT arrangements where a person (the purchaser) expects to benefit from arrangements relating to another person’s (the supplier) tax position
  • Condition F covers disclosable indirect tax arrangements

The relevant defeat is incurred when the condition in question is first met. Relevant defeat is a term that underpins STAR and refers to:

  • new arrangements entered into which is defeated at any time on or after 15 September 2016
  • existing arrangements which are defeated on or after 6 April 2017 without having been (or agreed to be) fully disclosed to HMRC before 6 April 2017

The relevant defeat triggers the issue of a warning notice that marks a person’s entry into (or re-entry into, or extension of the warning period during which they are to be subject to) STAR and the requirement to file (or to continue to file) annual information notices.

Relevant defeats of new arrangements which are used when a person is in a warning period give rise to the next level of sanctions.

This sanction level begins with a penalty on the first relevant defeat of arrangements used during a warning period and moves to progressively higher penalties if further arrangements used in the same warning period are subject to a relevant defeat.

In each case it’s irrelevant whether the relevant defeat is incurred in the warning period in which the arrangements are used or at any time thereafter.

There are also sanctions of naming and restriction of reliefs after the third relevant defeat of an arrangement used during the warning period

STAR applies to a taxpayer whose arrangements are to be regarded as being the subject of a relevant defeat because they are avoidance arrangements. They can be:

  • counteracted by HMRC under the GAAR in part 5 Finance Act 2013 and sections 10 and 11 National Insurance Contributions Act 2014
  • the subject of a follower notice issued by HMRC under part 4 chapter 2 Finance Act 2014 and the tax advantage sought by the use of such avoidance arrangements has been counteracted, or corrective action has been taken
  • DOTAS arrangements for STAR purposes, and the tax advantage sought by the use of such avoidance arrangements has been counteracted (other than by taxpayer emendations)
  • disclosable VAT arrangements for STAR purposes, and the tax advantage sought by the use of such avoidance arrangements has been counteracted (other than by taxpayer emendations])
  • disclosable indirect tax arrangements for STAR purposes, and the tax advantage sought by the use of such avoidance arrangements has been counteracted (other than by taxpayer emendations)

Any such relevant defeat is to be treated as incurred if and when such counteraction becomes final.

For follower notices, a relevant defeat is also incurred when the necessary corrective action for the purposes of section 208 Finance Act 2014 has been taken in respect of the whole of the denied advantage.

The purpose of STAR in setting conditions based on the GAAR, follower notices, DOTAS, disclosable VAT arrangements and disclosable indirect tax arrangements is to provide the broadest possible coverage of avoidance arrangements, whilst tying its remit to the existing avoidance framework.

Conditions C, D and F - requirement to rely on arrangements

Where a taxpayer enters into arrangements which are, or turn out to be, DOTAS arrangements or disclosable VAT or other indirect tax arrangements, the legislation applies if that taxpayer ‘relied on’ the arrangements by submitting a return, claim or election, or failing to discharge an obligation, on the basis that the arrangements work.

Relevant defeats and warning notices

Following a relevant defeat of avoidance arrangements, HMRC must issue a warning notice to the taxpayer within 90 days requiring them to provide annual returns of information on their use of DOTAS arrangements or disclosable VAT or other indirect tax arrangements during a warning period.

This must last for 5 years, but can sometimes be longer.

A taxpayer will not receive a warning notice if, in relation to their existing avoidance arrangements before 6 April 2017, any of the following apply:

  • the taxpayer’s tax affairs in relation to such existing avoidance arrangements are settled with HMRC
  • the taxpayer provides HMRC with full information about such existing avoidance arrangements
  • the taxpayer agrees to provide HMRC with full information about such existing avoidance arrangements and thereafter does so within the time limit set by HMRC

DOTAS, VADR and DASVOIT arrangements

Under paragraph 8 schedule 18 Finance Act 2016, the definition of DOTAS arrangements covers any arrangements which are ‘notifiable arrangements’ for the purposes of part 7 Finance Act 2004 as defined in section 306 Finance Act 2004.

Included in the definition of DOTAS arrangements for STAR purposes are:

Arrangements that implement a notifiable proposal which has been notified under section 308(1) Finance Act 2004 are also DOTAS arrangements.

For the purposes of STAR they are treated as if the details of the arrangements were notified to HMRC 5 days after the promoter first became aware of any transaction forming part of those arrangements.

STAR also covers arrangements which are ‘notifiable arrangements’ for DOTAS purposes (see section 306 Finance Act 2004) that should have been notified to HMRC, but where the person or persons responsible for doing this have not notified them under the DOTAS regime.

In such circumstances the arrangements will only be treated as ‘DOTAS arrangements’ for STAR purposes when one of the following applies:

  • the person responsible for notifying the arrangements agrees that the arrangements were notifiable
  • it’s finally determined by a relevant tribunal that the arrangements were notifiable under DOTAS

If the time at which one of the above occurs is after the time at which any counteraction of the tax advantages arising from the use of the arrangements by a taxpayer becomes final, then the arrangements will not be treated as disclosable VAT arrangements for STAR purposes in relation to that taxpayer (see Condition C and paragraph 14(7) schedule 18 Finance Act 2016).

Arrangements, to which a reference number has been allocated, are not DOTAS arrangements for the purposes of STAR where HMRC has given notice to a promoter under section 312(6) Finance Act 2004 that they are not required to notify that reference number to clients.

Notifiable arrangements include arrangements where a relevant promoter was not required to notify, because their duty to do so was discharged because a different promoter has already notified either:

  • the same proposal or arrangements
  • a proposal or arrangements which are substantially the same to HMRC (see paragraph 15.4 ‘Notification of co-promoters’ in the DOTAS guidance).

The relevant promoter’s duty to notify the arrangements itself would be discharged if both of the following apply:

  • another promoter has also notified the identity and address of the relevant promoter to HMRC or the relevant promoter has been given the scheme reference number
  • the relevant promoter holds the details of the notifiable proposal or notifiable arrangements which were notified to HMRC by that other promoter

Such notifiable arrangements, which were notified by a co-promoter, are treated for the purposes of the STAR provisions as if they were notified by the relevant promoter 5 days after the relevant promoter first became aware of any transaction forming part of those arrangements.

STAR covers National Insurance contributions. References to DOTAS rules (which are for taxes other than National Insurance contributions, VAT and other indirect taxes), include the corresponding rules for National Insurance, namely section 132A Social Security Administration Act 1992 and regulations made under that section.

There’s more information at paragraph 2.3 ‘Scope and summary of the disclosure rules’ in the DOTAS guidance.

Disclosable VAT and other indirect tax arrangements

Under paragraphs paragraphs 8A, 9 and 9A, schedule 18 Finance Act 2016, there are 2 alternative definitions of disclosable VAT arrangements:

  1. The definition that applied under VADR until the end of 2017, paragraph 9 schedule 18 Finance Act 2016
  2. The definition that applies under DASVOIT from 1 January 2018, see paragraph 8A(3) to (5) schedule 18 Finance Act 2016

There’s also a definition of indirect tax arrangements disclosable under DASVOIT at paragraph 9A schedule 18 Finance Act 2016, which applies to each of the indirect taxes (other than VAT).

VADR disclosable VAT arrangements

Under paragraph 9 schedule 18 Finance Act 2016, until the end of 2017 disclosable VAT arrangements meant schemes covered by (schedule 11A VATA 1994).

STAR applying to VADR disclosable VAT arrangements brought in VAT schemes that:

  • had been correctly notified
  • should have been notified and in respect of which there has been a failure to comply
  • had been notified voluntarily

STAR covers arrangements which were required to be notified to HMRC under VADR but where the person responsible for doing this had not notified them under the VADR regime.

In such circumstances the arrangements will only be treated as disclosable VAT arrangements for STAR purposes if and when one of the following applies:

  • the person responsible for notifying the arrangements agrees that the arrangements were required to be notified
  • it is finally determined by a relevant tribunal that the arrangements were required to be notified under VADR

If the time at which one of the above occurs is after the time at which any counteraction of the tax advantages arising from the use of the arrangements by a taxpayer becomes final, then the arrangements will not be treated as disclosable VAT arrangements for STAR purposes in relation to that taxpayer (see Condition D and Condition E, and paragraphs 15(7) and 16(4) of schedule 18 Finance Act 2016).

VAT Notice 700/8 explains the arrangements and transactions that the taxpayer was required to notify to HMRC under VADR.

DASVOIT disclosable VAT arrangements

Under paragraph 8A schedule 18 Finance Act 2016, STAR applying to DASVOIT disclosable VAT arrangements brings in arrangements that are notifiable arrangements, whether or not they have been notified.

STAR covers arrangements which are required to be notified to HMRC under DASVOIT but where the person responsible for doing this has not notified them under the DASVOIT regime.

In such circumstances the arrangements will only be treated as disclosable VAT arrangements for STAR purposes if and when one of the following applies:

  • the person responsible for notifying the arrangements agrees that the arrangements are required to be notified
  • it is finally determined by a relevant tribunal that the arrangements are required to be notified under DASVOIT

If the time at which one of the above occurs is after the time at which any counteraction of the tax advantages arising from the use of the arrangements by a taxpayer becomes final, then the arrangements will not be treated as disclosable VAT arrangements for STAR purposes in relation to that taxpayer (see Condition D.

Notice 799 explains the arrangements and transactions that the promoter or, where the obligation rests with them the scheme user, is required to notify to HMRC under DASVOIT.

DASVOIT disclosable indirect tax arrangements

Under paragraph 9A schedule 18 Finance Act, STAR applying to DASVOIT disclosable indirect tax arrangements brings in arrangements that are notifiable arrangements, whether or not they have been notified.

STAR covers arrangements which are required to be notified to HMRC under DASVOIT but where the person responsible for doing this has not notified them under the DASVOIT regime.

In such circumstances the arrangements will only be treated as disclosable indirect tax arrangements for STAR purposes if and when one of the following applies:

  • the person responsible for notifying the arrangements agrees that the arrangements are required to be notified
  • it is finally determined by a relevant tribunal that the arrangements are required to be notified under DASVOIT

If the time at which one of the above occurs is after the time at which any counteraction of the tax advantages arising from the use of the arrangements by a taxpayer becomes final, then the arrangements will not be treated as disclosable indirect tax arrangements for STAR purposes in relation to that taxpayer (see Condition F and paragraph 16A(7) schedule 18 Finance Act 2016).

Notice 799 explains the arrangements and transactions that the promoter or, where the obligation rests with them the scheme user, the taxpayer is required to notify to HMRC under DASVOIT.

Failure to comply

Under paragraph 10 schedule 18 Finance Act 2016 the definitions of ‘DOTAS arrangements’ and ‘disclosable VAT and other indirect tax arrangements’ for STAR purposes include arrangements that the legislation requires to have been notified, but which have not been.

Where arrangements have not been notified, but it has been concluded that they should have been notified, they can fall within the scope of STAR.

A failure to notify is known as a ‘failure to comply’ and to be within the scope of STAR as it applies to a taxpayer’s arrangements, the failure to comply must be treated as occurring at or before the time at which the counteraction of the tax advantages which would otherwise arise from that taxpayer’s arrangements becomes ‘final ’.

For there to have been a failure to comply by a person required to notify arrangements, one of the following needs to apply:

  • that person must have acknowledged in writing to HMRC that they should have notified the arrangements, but failed to do so
  • the question of whether the arrangements should have been notified has been taken to the tribunal, and the tribunal has determined that that person should have notified the arrangements, and the appeal period has ended without the determination being overturned
  • in relation to DOTAS only but not in relation to notifiable schemes under VADR, or notifiable arrangements under DASVOIT, the question of whether the arrangements should have been notified has been taken to the tribunal, and they have determined that, though the arrangements should have been notified, the person had a reasonable excuse for not doing so and the appeal period has ended without the determination being overturned

The tribunal here means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.

Time of ‘use’ of defeated arrangements

Under paragraph 55 schedule 18 Finance Act 2016, penalties, naming and restriction of reliefs apply where a person ‘uses’ arrangements in a warning period.

Date of use - Condition A

This is the date when the person failed to comply with an obligation where the whole or part of the tax advantage sought from the arrangements arose as a result of, or in connection with, that failure.

Date of use - Condition B

This is the date when the person failed to comply with an obligation on the basis that the obligation would not have arisen had the tax advantage sought actually arisen.

Date of use - Conditions C, D and F

This is the date when the person failed to comply with an obligation, and the arrangements might be expected to have the effect that the obligation does not arise.

Date of use - Condition E

This is where a person (the purchaser) is a party to arrangements with respect to the VAT position of another person (the supplier).

This is either the:

  • filing date of any return or the date of any claim made by the supplier on the basis that the arrangements have the expected effect and the sought after tax advantage arises
  • date of any failure by the supplier to comply with an obligation relating to VAT

Filing dates for Conditions A, B, C, D or F

The ‘filing date’ means the earlier of the date when the return is delivered and the last day of the period within which the return must be delivered.

For conditions A, B, C, D or F, a person who has incurred a relevant defeat is treated as having ‘used’ the arrangements on the filing date of any return or the date of any claim, election, declaration or application for approval, made by the person on the basis that the arrangements have the expected effect and the sought after tax advantage arises.

Inheritance Tax - returns and assessments

The STAR rules refer to ‘returns’ and ‘assessments’, but Inheritance Tax administration uses the terms ‘accounts’ and ‘determinations’.

Under paragraph 56 schedule 18 Finance Act 2016, the word ‘return’ covers inheritance accounts and statements, and ‘assessment’ includes an Inheritance Tax determination.

A ‘return’ for the purposes of Inheritance Tax is:

An account delivered under sections 216 or 217 IHTA 1984 includes, for example, the account completed by a:

  • personal representative regarding a deceased individual’s estate
  • person making a lifetime transfer chargeable to Inheritance Tax
  • trustee of a settlement, regarding an event creating an Inheritance Tax charge

Sanctions for serial tax avoidance

The entry level sanction is the issue of a warning notice on a relevant defeat of an avoidance arrangement. This creates a warning period requiring a taxpayer to submit information notices (normally annually) during this period.

Further sanctions of penalties, naming and restriction on access to certain direct tax reliefs can occur if further new avoidance arrangements are used within a warning period and are defeated, even if defeated after the end of that warning period.

Safeguards are built into the STAR sanctions to ensure that they operate fairly:

Tax-geared penalties

Tax-geared penalties apply to new avoidance arrangements in a warning period and defeated within or after the end of the warning period.

Taxpayers with 3 or more defeats of avoidance arrangements used (as defined in STAR) during the same warning period can be named.

A taxpayer with 3 defeats of avoidance arrangements that attempt to exploit direct tax reliefs where such arrangements were used (as defined in STAR) in the same warning period, will be subject to a 3 year restriction on access to direct tax reliefs.

Special rules apply to taxpayers who are associated with, or in the same group of companies as, a person who uses avoidance arrangements, or if they are in a partnership which uses avoidance arrangements, and the arrangements are defeated. They will be put on warning as well as the person they are associated with or in the same group as, or in partnership with.

Voluntary disclosures

At any time, a taxpayer whose tax affairs are not already under enquiry and who has no reason to believe that enquiries are about to start, can prevent a warning notice letter being issued regarding their DOTAS or DASVOIT arrangements.

They can do this by fully disclosing to HMRC details of such avoidance arrangements and the amount of tax understated, with a view to settling with HMRC.

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