Promoters of Tax Avoidance Schemes: associated and successor entities rules
Published 8 March 2017
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Who is likely to be affected
Promoters of avoidance schemes who seek to circumvent the Promoters of Tax Avoidance Schemes (POTAS) legislation through the use of associated and successor entities.
General description of the measure
This measure will ensure that promoters of tax avoidance schemes cannot circumvent the POTAS regime by re-organising their business so that they either share control of a promoting business or put a person or persons between themselves and the promoting business. This will ensure HM Revenue and Customs (HMRC) can apply the POTAS regime as intended when introduced.
Policy objective
The changes to this legislation deter the use of avoidance schemes through influencing the behaviour of promoters, their intermediaries and clients.
Background to the measure
Changes to the POTAS legislation were introduced in Finance Act (FA) 2015 to ensure promoters cannot use associated and successor entities to circumvent the legislation. This measure will ensure these associated and successor entities rules function as intended.
Detailed proposal
Operative date
This measure will have effect on and after 8 March 2017.
Current law
Current legislation for POTAS can be found in Part 5 and Schedules 34 to 36 to Finance Act (FA) 2014 (as amended).
Proposed revisions
Legislation will be introduced in Finance Bill 2017 to amend the control definitions in paragraph 13A of Schedule 34 to FA 2014. These amendments introduce the term ‘significant influence’ to ensure promoters cannot reorganise their business so that they put a person or persons between themselves and the promoting business. The amendment also ensures that the control definitions apply where 2 or more persons together have control or significant influence over a business.
Consequential amendments will be made in paragraphs 13B to 13D of Schedule 34. These are only consequential amendments and will not change how these paragraphs operate.
Equivalent amendments will be made to the corresponding paragraphs in Schedule 34A.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|
This measure is not expected to have additional Exchequer impact. This measure supports the Exchequer in its commitment to protect revenue that was set out in the original Budget 2013 costing for POTAS. More details can be found in the policy document published alongside Budget 2013.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
The measure will impact on individuals who promote tax avoidance.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure will affect individuals who are likely to share protected characteristics with others of above average means. It is anticipated that equality groups represented in lower income groups are less likely to be affected.
Impact on business including civil society organisations
This measure will have no impact on businesses and civil society organisations who are undertaking normal commercial transactions; it will only impact on the businesses that are engaging in or promoting tax avoidance.
Operational impact (£m) (HMRC or other)
There will be no significant operational impact arising from this measure.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored using information collected from the limited population of designated promoters and their users.
Further advice
If you have any questions about this change, please contact James Stevens on Telephone: 03000 575530 or email: james.stevens3@hmrc.gov.uk.