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HMRC internal manual

Apprenticeship Levy Manual

Apprenticeship Levy avoidance: DOTAS: introduction

HMRC’s anti-avoidance strategy has 3 core elements:

  • preventing tax and NICs avoidance at the outset where possible
  • detecting avoidance early where it persists
  • countering it by HMRC challenging it effectively.

Disclosure of Tax Avoidance Schemes (DOTAS)

Part 7 of the Finance Act 2004 (sections 306 to 319) provides for the notification of certain arrangements and proposals (“schemes”) to HMRC, this is known as the DOTAS regime.

DOTAS requires a promoter (and in some cases the users) of certain schemes expecting to obtain tax or National Insurance contributions (NICs) advantages to provide information to HMRC about those schemes. This provides HMRC with:

  • early information about avoidance schemes and how they’re claimed to work
  • information about those who have used those arrangements

Finance Act 2016 (section 104(1)) added the Apprenticeship Levy to the list of taxes to which DOTAS applies (section 318 of FA 2004).

The Tax Avoidance Schemes (Miscellaneous Amendments) Regulations 2017 No. 1171 from 21 December 2017 applied the Apprenticeship Levy to aspects of:

  • The Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006 (“the Hallmark Regulations”) which describe the types of schemes which must be notified to HMRC


  • The Tax Avoidance (Information) Regulations 2012 (“the Information Regulations”) which sets out the information which must be provided to HMRC in relation to notifiable schemes and the time limits within which it must be provided

If a promotor (or user as appropriate) doesn’t notify HMRC about arrangements that must be disclosed they could be liable to substantial penalties.

A scheme must be disclosed when:

  • it will, or might be expected to, enable any person to obtain tax and/or NICs advantages
  • that advantage is, or might be expected to be, the main benefit or one of the main benefits of the scheme and
  • the scheme falls within any description (known as ‘hallmarks’) prescribed in the relevant regulations.

The rules requiring disclosure of schemes which might be expected to obtain not only a tax and/or NICs advantage for any person but also an advantage in relation to the apprenticeship levy aren’t affected by DOTAS being extended to cover the apprenticeship levy. The only difference will be that the description of the scheme which the person making the disclosure is required to make should also tell HMRC about the apprenticeship levy advantage to which the scheme is expected to give rise.   

Schemes which will or might be expected to obtain an advantage in relation to the apprenticeship levy only must also be disclosed if:

  • that advantage is or might be expected to be at least one of the main benefits of the scheme
  • one of the confidentiality, premium fee and standardised tax products hallmarks apply to the scheme
  • either the proposal was first marketed on or after 21 December 2017 or the first transaction forming part of arrangements implementing such a proposal happened on or after that date.

HMRC guidance on DOTAS, including detailed information on promoters and the hallmarks in DOTAS is available on GOV. UK.

Under DOTAS it is usually the promoters who must provide information to HMRC about the scheme and this applies equally to Apprenticeship Levy avoidance schemes. A person is a promoter of a scheme if they design it, market it, make it available, organise or manage transactions implementing the scheme in the course of a relevant business. Promoters are normally required to provide the information within 5 days of the scheme first being made available or implemented.

The promoter must report the scheme to HMRC using the form AAG1.

Scheme users must provide information about the scheme to HMRC in circumstances when:

  • all promoters of the scheme are resident outside the UK and haven’t disclosed it – in which case users must provide information to HMRC on form AAG2 within 5 days of first entering into the scheme
  • the only promoter is entitled to rely on legal and professional privilege not to disclose it, in which case users must provide information to HMRC on form AAG3 within 5 days of first entering into the scheme
  • there is no promoter of the scheme – it is what is known as an in-house scheme – in which case users must provide information on form AAG3 within 30 days of first entering into the scheme.

The forms to notify HMRC can be found here.

When a promoter discloses a scheme, HMRC may allocate a scheme reference number (SRN) and notify it to the promoter. The promoter must pass the SRN to users of a scheme (usually the promoter’s clients) who in turn must identify themselves to HMRC by reporting the information back to HMRC.

Users of schemes which obtain an advantage in relation to NIC and/or the Apprenticeship Levy and receive an SRN from a promoter, must report the SRN to HMRC by completing and sending a form AAG4 to HMRC within 14 days after the end of the final tax period in the tax year (i.e. if the final tax period runs to 5 April, then by 19 April).

Apprenticeship Levy Avoidance: Disclosure of Tax Avoidance Schemes (DOTAS)