Open consultation

Closing in on promoters of marketed tax avoidance

Published 26 March 2025

Summary

Subject of this consultation

The government welcomes views on some new proposals to close in on promoters (and other enablers) of tax avoidance schemes and do more to support customers to steer clear of and permanently exit tax avoidance.

Scope of this consultation

The government is seeking views on a range of new measures to close in on promoters of tax avoidance. These include proposals that would give HMRC additional powers and stronger sanctions, allowing HMRC to more efficiently and effectively disrupt the business model promoters rely on. The government’s intent is to make a step change in efforts to close in on the small number of remaining promoters of tax avoidance. This would contribute to closing the tax gap attributable to marketed tax avoidance.

The government seeks views on proposals in four areas:

• expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
• introducing a Universal Stop Notice and Promoter Action Notice
• tackling controlling minds and those behind the promotion of avoidance schemes through new highly targeted obligations and stronger information powers
• exploring options to tackle legal professionals designing or contributing to the promotion of avoidance schemes

The government also seeks views on areas it intends to explore further in the future.

Who should read this

The government would welcome views from members of the public, representative bodies and advisers, as well as businesses and individuals who may have received marketing material, taken advice about, or used arrangements which seek to avoid tax.

Duration

The consultation runs from 26 March 2025 to 18 June 2025.

Lead official

The lead officials are D Bagg and T Kelly of HM Revenue and Customs (HMRC).

How to respond or enquire about this consultation

Please send all responses or enquiries to ca.consultation@hmrc.gov.uk.

Please note that the mailbox will not accept emails larger than 10MB.

Additional ways to be involved

HMRC welcomes meetings with interested parties to discuss these proposals.
Please contact the lead officials at the above email address if you are interested in arranging a meeting.

After the consultation

The government will analyse the consultation responses and publish its response later this year.

Previous engagement

This is the first consultation on the proposals described in this consultation document.

1. Foreword

Autumn Budget 2024 marked a step change in the government’s ambition to close the tax gap. The government announced it would take stronger action against promoters of marketed tax avoidance. I am therefore pleased to publish this consultation on Closing in on Promoters of Marketed Tax Avoidance.

Closing the tax gap and making sure everyone is paying the tax they owe is one of my top priorities for HMRC. It is vital that these revenues are collected to fund our essential public services and make the tax system fairer. Our tax system is built on the principles of fairness, trust and compliance, and the actions of promoters of marketed tax avoidance facilitate non-compliance and contribute to the tax gap. These efforts to game the system generate no additional value for the economy and deprive vital public services of funding. It is crucial that we uphold these principles by closing in on promoters of marketed avoidance and end their activities altogether.

This consultation seeks views on a range of measures to enhance HMRC’s ability to counteract promoters and their schemes, which will enable HMRC to take decisive action against them. These include expanding the scope of the Disclosure of Tax Avoidance Schemes (DOTAS) regime, introducing new tools like the Universal Stop Notice (USN) and the Promoter Action Notice (PAN), and implementing stronger information powers. Additionally, steps are proposed to tackle the involvement of legal professionals in these schemes.

I welcome views on these proposals, which represent a significant step forward in our efforts to close the tax gap. The government’s longer-term ambition is to design out tax non-compliance and make the tax system easier and quicker to deal with for taxpayers, delivering the modern and digital service businesses and individuals expect in the 21st century. I believe that these changes will not only protect the exchequer and the tax system but uphold their reputation and ensure a level playing field for all.

I invite all stakeholders, professional bodies, and taxpayers to engage with this consultation and share their views. Your feedback is vital in shaping a tax system that is fair, efficient and trusted by all.  

James Murray MP
Exchequer Secretary to the Treasury

2. Introduction

The government is clamping down on tax avoidance, focusing on those who sell tax avoidance schemes.

Tax avoidance is bending the tax rules to seek to gain a financial advantage never intended by Parliament. It often involves contrived or artificial transactions that serve little or no purpose, other than seeking to reduce the amount of tax that is paid.

Marketed tax avoidance involves mass-marketed avoidance schemes, sold to one or more individuals and businesses for a fee with the aim of reducing their tax liabilities. Most tax avoidance schemes simply do not work, and those who use them may end up having to pay more than the tax they tried to avoid, including interest and penalties.

A persistent and determined group of promoters of tax avoidance seek to exploit every opportunity to harm the tax system by selling tax avoidance schemes they claim sidestep the rules. They cause harm to public finances and to the individuals that use the schemes they promote, who often end up with large tax bills on top of the substantial fees already paid out to the promoters. The government is determined to close down this unacceptable behaviour.

The scale of tax avoidance today

HMRC’s illustrative estimates of the tax gap by taxpayer behaviour show that around £0.5 billion of the tax gap relates to marketed avoidance schemes sold to individuals. This has fallen from an estimated £1.5 billion in the financial year 2005 to 2006.

Currently the avoidance market is dominated by disguised remuneration schemes. Disguised remuneration schemes claim to avoid Income Tax and National Insurance contributions (NICs) on a worker’s earnings. They normally involve paying earnings in the form of loans or other payments which are claimed to be not taxable.

HMRC does not accept these schemes remove the liability to tax and NICs. These schemes do not work and the courts have agreed with HMRC’s view.

HMRC has identified around 20 to 30 currently active promoter organisations who sell mass marketed tax avoidance schemes, some based offshore and hiding behind complex corporate structures. Promoters are rarely members of professional bodies, and take every opportunity to sidestep the rules, rarely co-operating with HMRC, so they can continue to sell their schemes.

The government intends to further close in on promoters of tax avoidance

Over the last 6 years HMRCs powers have evolved and strengthened, including the introduction of a power to name promoters and publish details of their avoidance schemes; a power to issue Stop Notices (which legally require a promoter to stop promoting a specified scheme); and new criminal offences for not complying with Stop Notices.

These powers have enabled HMRC to close down schemes more quickly. For example, between HMRC acquiring powers to publish details of avoidance schemes and promoters and the end of 2024, HMRC named 135 schemes, 129 promoters, and 50 connected persons (such as directors of promoter companies). By the end of 2024 HMRC had issued 21 penalties, totalling over £41 million, against promoters failing to comply with Stop Notices. HMRC had also forced 48 schemes to be registered under the DOTAS anti-avoidance rules using new powers in Finance Act 2021.

However, the government wants to go further and make a step change in the efforts to tackle the small number of promoters who remain and shut down the schemes they promote.

The government is therefore consulting on this package of measures which is intended to crack down harder on all elements of promoter activity by strengthening penalties and sanctions, denying them access to the products and services they need to run their business and forcing them to provide more information about their activities to HMRC.

The government is also determined to bring criminal powers to bear against promoters. The government believes additional criminal sanctions will provide a more effective deterrent against promotion of marketed avoidance and provide appropriate consequences for the harm promoters cause the exchequer, the tax system and taxpayers. This consultation document therefore includes several proposals for new criminal sanctions in existing and proposed anti-avoidance measures.

In particular, the government sees advantage in using multiple criminal offences to close the space for promoters to act. There is an existing criminal sanction for not complying with a Stop Notice, and this consultation proposes a new criminal sanction for failure to disclose avoidance schemes under DOTAS. Taken together, this means there would be criminal sanctions when a promoter did not tell HMRC about a scheme and criminal sanctions when they did not stop promoting it when required to.

The government is also using this opportunity to outline high-level areas where it is looking to develop future proposals. These are additional to the specific proposals in this document and demonstrate the government’s determination to drive promoters of avoidance out of the market.

Question 1: What other ideas, in addition to the ones in this document, should the government consider to deliver its intent of closing in on promoters of marketed avoidance?

Supporting those caught up in tax avoidance schemes

The government wants people to steer clear of tax avoidance. HMRC challenges the use of tax avoidance schemes, and the vast majority simply do not work as claimed. People who use avoidance schemes could end up having to pay more than the tax they tried to avoid, including interest and penalties on top of the fees they have paid to the promoter. HMRC’s latest operational data shows that in the year 2022 to 2023 there were approximately 36,000 individuals using an avoidance scheme.

HMRC use data, intelligence and risk tools to identify new avoidance schemes, and continue to invest in new ways to spot emerging risks. Since April 2022 HMRC has published the details of tax avoidance schemes and their promoters to help support taxpayers steer clear of these schemes. We actively update the published list, and promote it on social media and in the press.

HMRC does not approve tax avoidance schemes. If a tax avoidance scheme is not shown in the GOV.UK list of named tax avoidance schemes this does not mean that HMRC accepts the scheme works to achieve the tax savings it promises.

HMRC uses real-time data to identify people who might have entered tax avoidance schemes and writes to them within two months advising them how to exit before they build up large tax bills.

HMRC continues to expand its ‘Tax Avoidance: Don’t Get Caught Out’ campaign to help people steer clear of avoidance schemes. HMRC also continues to update its Spotlight series with information about new types of avoidance schemes, to help people identify them before they get involved.

The government appreciates there’s a personal story behind every unpaid tax bill and HMRC takes the wellbeing of all customers very seriously. HMRC recognises that undergoing a compliance check and facing a large tax bill can be stressful. It is committed to identifying and supporting people who need extra help meeting their tax liabilities, and has made significant improvements to this service over the last few years. Anyone who is worried about paying what they owe should contact HMRC to talk about the options, which can include agreeing an affordable and sustainable instalment plan for as long as they need based on their specific circumstances.

Question 2: Is there more HMRC can do to support those who use tax avoidance schemes?

How the government intends closing in on promoters at each element of promotion

The structure of the consultation reflects proposals for tackling all stages of promoter activity:

• chapter 1 sets out the ministerial foreword for the document
• chapter 2 (this chapter) sets out the government’s intention behind this package of measures and general background on tax avoidance
• chapter 3 sets out proposals to widen the scope of the DOTAS regime
• chapter 4 sets out a proposal for a Universal Stop Notice and a Promoter Action Notice, allowing HMRC to more quickly stop schemes from being promoted
• chapter 5 sets out proposals for stronger HMRC information powers so HMRC can effectively investigate those who own and control promoter organisations
• chapter 6 sets out proposals to tackle the small number of legal professionals promoting, designing and providing advice to help sell avoidance schemes
• chapter 7 sets out areas that the government intends to explore further in the future
• chapter 8 sets out an initial assessment of the impact of proposals in chapters 3 to 6
• chapter 9 sets out a summary of all the questions raised in this document
• chapter 10 sets out details of how to reply to this consultation

How these proposals complement wider government action to close the tax gap

Closing the tax gap is a priority for the government, and at Budget 2024 it announced the most ambitious ever package to achieve that. This includes other measures and proposals that will contribute to closing in on promoters whilst tackling other areas of non-compliance in the tax system.

The government is also consulting on enhanced powers to tackle the broader issue of tax advisers who facilitate non-compliance, covering a wider range of circumstances where HMRC encounters harm to the tax system caused by tax advisers. The government published its consultation on this at Spring Statement 2025.

In addition, at Budget 2024, the government announced it will mandate registration of advisers interacting with HMRC from April 2026, including enforcing minimum standards. The promoters who are required to register will be subject to the same minimum standards as other tax advisers.

Moreover, at Budget 2024 the government announced it would tackle non-compliance in the umbrella company market by legislating to move PAYE obligations to recruitment agencies or, where an agency is not present, to end-client businesses from April 2026. Whilst many umbrella companies operate diligently, too many are used to facilitate non-compliance including tax avoidance, with some engaging workers through disguised remuneration schemes. Changing these employment tax rules could greatly reduce opportunities for promoters to sell tax avoidance schemes using umbrella companies.

The government continues to recognise that it is important to strike the right balance between HMRC having effective powers to close the tax gap and ensuring that there are robust legal safeguards and governance processes in place. This balance is at the heart of the design principles identified in the HMRC Review of Powers, Deterrents and Safeguards of 2005 to 2012.

The government looks forward to engaging with stakeholders on these proposals, building on the positive engagement on previous evolution of HMRC powers. The government is committed to closing in on promoters by ensuring these measures are appropriately targeted and have appropriate safeguards for those who are not participating in marketed tax avoidance.

As well as comments on the proposals outlined below, the government welcomes any other proposals that could help it deliver on its intention of closing in on promoters of tax avoidance.

3. Expanding and strengthening the DOTAS regime

Background

DOTAS was introduced in 2004 and seeks to provide HMRC with early information about tax avoidance arrangements.

Early notification of arrangements can accelerate policy and legislative change necessary to close attempts to exploit perceived loopholes, identify scheme users and inform HMRC’s operational work. This allows HMRC to act to close down arrangements which do not work, protecting the tax system from harm and preventing taxpayers from incurring unexpected tax bills.

DOTAS has been updated regularly since 2004, as both the avoidance market and HMRC’s strategy for tackling it have evolved. It has been, and continues to be, a valuable tool, identifying thousands of users of avoidance and billions of pounds of tax at risk. In the main, large businesses and reputable advisers have moved away from avoidance and promoters of tax avoidance are now concentrated in smaller specialist marketed tax avoidance firms, some of which have complex structures to attempt to hide their activity. DOTAS has evolved over time to be not just an information tool. It has been changed to trigger other anti-avoidance regimes such as accelerated payments – where a scheme is disclosed under DOTAS, those who use the scheme can be forced to pay the disputed tax upfront. The government now wants to go further in strengthening the impact of DOTAS.

Current position

DOTAS remains primarily a disclosure regime which exists to provide HMRC with early disclosure of information about tax arrangements, how they work and who has used them.

The duty to disclose normally falls on a scheme promoter. However special rules apply when:

• a non-UK based promoter does not disclose a scheme – here the client of the promoter is required to disclose the scheme
• the promoter is a lawyer, and legal professional privilege prevents them from providing all or part of the prescribed information to HMRC – here the lawyer’s client must disclose the scheme (see more detail in chapter 6)
• there is no promoter (for example, the scheme is devised ‘in-house’ for use within that entity) – here the scheme is disclosed by the scheme user

DOTAS requires that information shall be provided by a promoter (or others) in respect of notifiable proposals or notifiable arrangements, as defined in the legislation. There is no provision in the legislation for a scheme to be disclosed on a ‘precautionary’ basis. If tests set out in the legislation are met, then arrangements should be disclosed within specified time limits. Penalties can apply if a scheme is not disclosed accurately and at the right time.

DOTAS relies on a set of ‘hallmarks’ to describe what type of arrangements need to be disclosed. The hallmarks are intended to be descriptions capable of being identified by a promoter/in-house team, at the time the product is being developed or begins to be sold.

Arrangements must be disclosed when they fall within one (or more) hallmark and the main benefit, or one of the main benefits expected, is obtaining a tax advantage. The absence of a hallmark should not be regarded as an indicator that the arrangements are practices that are acceptable to HMRC, or that they are not tax avoidance.

Proposals

In line with the commitment to widening the scope of DOTAS to ensure a wider range of tax arrangements are reported to HMRC, the government now seeks views on a number of options to strengthen and expand DOTAS:

• a new hallmark to more clearly target disguised remuneration schemes
• a criminal offence for failure to notify arrangements under DOTAS
• updating the DOTAS civil penalty regime

A hallmark for disguised remuneration

In 2022 to 2023 the avoidance market for both individuals and employers was largely made up of disguised remuneration schemes.

HMRC’s view is these arrangements should properly be disclosed under DOTAS as they are caught by an existing hallmark. However, the promoters of such arrangements try to circumvent their obligation to disclose, either by trying to redesign the arrangements to attempt to sidestep DOTAS, or by relying on tenuous arguments as to why the hallmarks do not apply. To address this, the government is now considering the introduction of a new hallmark to explicitly catch these schemes.

Typically, such arrangements involve paying an employee a small amount of earnings via PAYE, with the balance paid to the employee without tax deducted. It is these crude schemes which the government wishes to catch with this new hallmark.

For the hallmark to be effective it needs to be sufficiently wide to catch the range of schemes that HMRC are dealing with.

The government recognises that businesses may have genuine reasons for making untaxed payments to their employees, such as reimbursement of certain allowable expenditure. The government does not wish such arrangements to be within the scope of DOTAS.

Question 3: Do you think there are features of disguised remuneration schemes that could feature in a new DOTAS hallmark that makes it clearer that disclosure is required and reduces the burden on HMRC of demonstrating non-compliance?

Question 4: For the purposes of this DOTAS hallmark, should consideration be given to any specific exclusions, for example reimbursement of certain employment related expenses?

Question 5: Are there other areas or arrangements where a new DOTAS hallmark would help the government tackle marketed tax avoidance?

A criminal offence for failure to notify arrangements to HMRC under DOTAS

Since its introduction in 2004, DOTAS has played an important role in HMRC’s compliance efforts against marketed avoidance. However, over time, the number of disclosures under DOTAS has declined. The government is therefore considering whether a stronger sanction should be introduced to ensure compliance with the obligation to notify. The proposal does not seek to change the underlying rules and obligations of the DOTAS regime, including the existing civil penalties for non-compliance. The proposal is to create a new criminal offence of failing to disclose notifiable arrangements to HMRC under DOTAS.

The proposed change would create a new strict liability offence committed where a person, without reasonable excuse, fails to notify arrangements to HMRC under DOTAS. It would be a criminal offence regardless of the person’s intent. This would be the case regardless of any dispute about the effectiveness of the arrangements.

We propose that the new offence should have a maximum sentence of an unlimited fine and up to 2 years imprisonment or both. This criminal offence would sit alongside the existing civil sanctions that apply to those who fail to notify notifiable arrangements to HMRC, giving HMRC flexibility to choose whether to pursue a civil penalty or open a criminal investigation. The decision would be made in line with HMRC’s existing criminal investigation policy and processes, reserving criminal investigation for more serious cases, where HMRC needs to send a strong deterrent message or where civil interventions are not effective. Any criminal investigation would be subject to HMRC’s governance and oversight for criminal investigations. The guidance covering this is published on GOV.UK.

Given not all cases will warrant criminal investigation, it is important to retain the existing civil penalties. These allow HMRC to secure a financial penalty more quickly than a criminal fine.

The civil penalties can be substantial but introducing a new criminal offence whilst maintaining the civil penalty will ensure maximum deterrence to promoters by providing alternative ways for HMRC to tackle non-compliance with DOTAS.

Question 6: Do you agree that the twofold approach of civil penalties and a criminal offence will provide a stronger deterrent?

Question 7: Should the criminal offence be restricted to schemes where there is a promoter acting?

Question 8: What reasonable care/excuse arguments would be appropriate? How might these be framed to prevent promoters from abusing these aspects? What reasons should be excluded from reasonable excuse?

Updating the DOTAS civil penalty regime

Since DOTAS was introduced in 2004, the avoidance landscape and HMRC’s approach to tackling avoidance has moved on significantly. However the DOTAS penalty legislation has not.

Currently, most DOTAS penalties fall to be imposed by the Tax Tribunal after a hearing. This is now out of step with other more recent HMRC anti-avoidance penalties, which are issued by HMRC, but carry a right of appeal to the Tribunal. Imposition of penalties by the Tax Tribunal takes significantly longer than HMRC imposed penalties and accordingly does not provide the desired deterrent effect.

We propose amending the DOTAS penalty legislation to allow HMRC to determine the penalties directly. This change will significantly speed up HMRC’s ability to issue penalties, meaning that promoters face consequences for non-compliance with DOTAS much sooner. This is important as the market for avoidance schemes is fast-moving, This will increase the deterrent effect of the penalties and encourage greater compliance with DOTAS obligations. This would also bring the process for issuing DOTAS penalties in line with other anti-avoidance legislation, such as HMRC’s power to allocate a scheme reference number without a DOTAS disclosure and penalties for breaching a stop notice under the Promoters of Tax Avoidance Schemes legislation. We would maintain a safeguard by including a right of appeal to the Tribunal against the penalties.

Question 9: Do you agree that moving the issuing of DOTAS penalties from the Tax Tribunal to HMRC (appealable to the Tax Tribunal) is appropriate?

Question 10: Are there any other changes to DOTAS penalties HMRC should consider?

4. Universal Stop Notices (USNs) and Promoter Action Notices (PANs)

Background

The Promoters of Tax Avoidance Schemes (POTAS) legislation was introduced in 2014 to enable HMRC to tackle promoters of tax avoidance schemes. The objectives of the regime are to change the behaviour of promoters and to deter the development and reduce the availability of tax avoidance schemes. The legislation gives promoters an opportunity to change their behaviour or face an escalating series of sanctions if they do not.

In 2021 Stop Notices (SNs) were introduced to strengthen the POTAS regime. SNs are a legally enforceable notice given to any person suspected of promoting tax avoidance schemes where certain conditions are met. An SN requires the persons subject to the notice to immediately stop selling and operating the specified scheme, preventing both further take up and continued use.

An SN also requires compliance with certain other obligations, for example the requirement to pass the SN on to certain persons and to report to HMRC details of the people that the scheme has been promoted to. Once a person is subject to an SN, they must comply with it in full unless it is suspended or withdrawn either by HMRC or by a decision of a tribunal or court. Failure to comply with the requirements of a SN is a criminal offence and can result in substantial civil penalties.

The legislation covering SNs can be found at sections 236A-K Finance Act 2014. The legislation was updated in Finance Act 2024 which made failure to comply with an SN and failure to pass it on to connected parties, who then promote the scheme, a criminal offence.

Current position

To date, SNs have been a powerful and important tool in severely disrupting promoter activities, closing down schemes and reducing the number of people using those schemes. However, promoters will often close down the company subject to the SN before promoting a similar scheme from different companies with different directors. This is commonly referred to as ‘phoenixing’.

As a result, HMRC is generally unable to mount a challenge on a basis that the SN was not complied with. This is due to the requirements for evidencing connections between the parties and whether promoters have passed on the SN to others within the promoter structure. As there are challenges around quickly evidencing the connection between the two entities, HMRC generally has to go through the process of issuing a new SN to the new entity. In doing so HMRC is required to gather sufficient evidence to demonstrate to an Authorised Officer (AO) that a new stop notice should be issued. During this time promoters are able to continue to sell the scheme.

Case Study 1: typical example of a Stop Notice outlining some of the challenges around delays, phoenixism, establishing connections and reissuing a new stop notice

Using Real Time Information (RTI) data, Promoter P is suspected of promoting a disguised remuneration scheme (which pays loans in place of salary) to over 1,000 taxpayers.

An AO in HMRC issues a stop notice to promoter P requiring them to stop. HMRC then identify Promoter Q which is promoting a similar scheme to Promoter P’s scheme with over 900 of the taxpayers that were in the previous scheme. HMRC believe that Promoter P and Promoter Q are connected and that a relevant transfer has taken place of Promoter P’s business, either in whole or in part, to Promoter Q.

However, HMRC is not able to evidence a connection between the different directors for each of the companies involved in the schemes. In addition, there is no clear evidence which demonstrates a connection to Mr R who has control or influence over one of more of the directors. Without this evidence HMRC are not able to use the transfer legislation and we issue a new stop notice to Promoter Q as HMRC are not able to draw on sufficient evidence to demonstrate that Promoter P has failed to pass on a stop notice. During this time, Promoter Q has managed to promote the scheme for 4 months before a stop notice has been issued and has generated fees of about £1m per month with a tax loss to the Exchequer of £2m per month. When Promoter Q is issued with a stop notice, Mr R transfers the business to Promoter S.

As a result, the cycle begins again. HMRC similarly struggles to find evidence connecting the scheme to Mr R and thereby has to issue a new stop notice to Promoter S. This leaves a gap in which Promoter S continues to run the scheme.

Promoters also use unconnected legitimate businesses to facilitate the selling of their tax avoidance schemes. It is through these legitimate businesses that promotion of avoidance is made possible. Facilitation is often unwitting and can be by way of providing financial services, insurance products, advertising services, employment services, and other products or services vital to promoters.

Case Study 2: example of how promoters and enablers use businesses to promote tax avoidance schemes and how detrimental this is to taxpayers and the government

Promoter P in Case Study 1 sets up umbrella company C which is used to pay staff who are provided by employment agency D and who are the users of the scheme. Employment agency D does not know that umbrella company C is connected to Promoter P.

Promoter P also uses the services of social media company H to advertise their scheme online to taxpayers. Social media company H is not aware that Promoter P is a promoter. Promoter P also uses the financial services of bank K to receive money from users of the tax avoidance scheme and send monies to Mr R who is based in an offshore tax haven. Bank K is unaware that P is a promoter, and that their customers are sending money to a promoter, money that should be taxed by HMRC.

The effect of using these employment, financial and social media services means that Promoter P is able to continue to operate: to benefit from a supply of taxpayers from employment agency D, advertise to further taxpayers, and move monies through bank accounts to an offshore location.

Proposed changes

To close in on promoters and enablers the government proposes the introduction of the following:

A Universal Stop Notice (USN)

The USN would require all persons to stop promoting or enabling schemes which are the same or similar to that outlined in the notice. If the changes became law, HMRC would issue USNs so that any promotion and enabling of schemes with arrangements similar to those described in a USN would constitute a breach of the USN. ‘Similar’ would take the same meaning as in the current SN powers. Breaching the USN would attract a range of sanctions, which already exist for SNs and other HMRC powers, which include publication, penalties and imprisonment of up to 2 years. It would be the responsibility of the promoter or enabler to ensure that they were in compliance with a published USN. The main vehicle for issuing USNs would be publishing them on a page on the GOV.UK website. However, the government will also explore additional methods for publishing a USN to optimise the coverage and raise awareness of it. This could include sending copies of the USN to known promoters and sharing with appropriate representative bodies so they could ensure their members are aware.

It is proposed that where there is a failure to comply by the promoter/enabler this would also be considered to be a failure by the person who has control or significant influence over them. Where an individual has influence or control over a number of entities that each breach the USN, they would receive a greater sanction, for example higher financial penalties or face criminal investigation and potential prosecution. Furthermore, the USN would have appropriate information powers to support compliance with the regime, which would be similar to existing powers under the POTAS regime and would link into the proposed information powers outlined below in chapter five of this document.

The proposed changes would mean that the USNs could be deployed quicker than current POTAS SNs. It is proposed that HMRC would be able to issue a USN where it anticipates that a scheme could be promoted, for example, where HMRC receives intelligence of a novel scheme being prepared before its launch. Furthermore, USNs would enable HMRC to tackle ‘phoenixing’ and other delaying tactics used by promoters by preventing the promotion of a specific type of scheme across the board by any entity. For the USN, restrictions similar to those found within paragraph 3A Schedule 24 of Finance Act 2007 regarding reasonable care and reasonable excuse are being considered so that the delaying tactics deployed by promoters and the misleading arguments they make are countered.

Case Study 3: example of how a USN might work using a current STOP Notice case

Once the proposals become law, an AO in HMRC publishes USNs for all known schemes of a specified type on GOV.UK.

Promoter P is promoting a scheme that has 1,000 users which is similar to previous schemes HMRC is aware of. Sometime after the USNs have been issued, HMRC identify this scheme and refer it to the AO for consideration. Their view is that this similar scheme is caught by a USN and Promoter P has failed to comply with the USN.

Consequently, a sanction is considered and issued by the AO, who would consider whether a criminal offence should apply. Promoter P would be informed of their right to make representations, and these would be considered by the AO alongside other evidence when determining the appropriate sanction.

Promoter Q starts to promote a similar scheme to the scheme that Promoter P is promoting. The AO determines that Promoter Q’s scheme is also caught by the USN, and appropriate sanctions would be considered and issued by the AO. Promoter Q has the opportunity to make representation against the sanction. Importantly, HMRC would not need to consider the connection between Promoter P and Promoter Q to be able to issue and apply sanctions against both parties. HMRC gathers evidence that Promoter P and Promoter Q are connected through the influence exerted by Mr R, who is based in an offshore tax haven, and his UK based representatives, Miss T and Mr U.

The USN would be designed to catch connected parties and those who have control or influence over those promoting tax avoidance schemes. The AO determines that Mr R, Miss T, and Mr U have failed to comply with the USN in relation to both the failure by Promoter P and Promoter Q. Consequently, they would receive stronger sanctions or face criminal investigation and potential prosecution. Mr R, Miss T, and Mr U would have the opportunity to make representations against those sanctions.

Promoter P, Promoter Q, Mr R, Miss T and Mr U have all failed to comply with the USN from the moment promotion of tax avoidance began by P and Q.

Sanctions for failure are issued at an early point and the benefit of phoenixing is removed. There are stronger sanctions on those behind the promoting activity to deter them and others from further promotion. The USN would reduce the time HMRC takes to act, reduces the number of taxpayers who enter the scheme and the loss to the exchequer. It also reduces the monies which promoters make which further disincentivises them from further promotion of schemes.

Promoter Action Notice (PAN)

A Promoter Action Notice (PAN) would require businesses to stop providing products or services to promoters and enablers of tax avoidance where those products or services are connected to the promotion of avoidance. The government recognises that the vast majority of businesses are not involved in and do not knowingly facilitate the promotion of tax avoidance schemes, and that most businesses are keen to maintain high standards of tax compliance.

This proposal would support businesses to not facilitate tax avoidance. It would help them recognise when their products and services are being exploited by promoters to harm the exchequer and the tax system and would provide them with an opportunity to work with HMRC to prevent this happening.

The government envisages where their products or services are being used to aid the promotion of tax avoidance most businesses would want to work collaboratively with HMRC to take action against promoters. HMRC would send a first contact letter to alert them so they can begin to consider what action to take and have the opportunity to verify information with HMRC about the promoter. Following this (if required) HMRC would issue a PAN so the business had a legal basis to take action.

The PAN would require the business to stop providing products or services to a suspected promoter, persons connected to the promoter who benefit from the promotion and selling of tax avoidance schemes, and those acting as their agent; and to stop any other activity which benefits these persons. For example, this would include:

• persons acting on behalf of the promoter or enabler or entities owned or controlled by them
• trusts where a settlor, trustee, or beneficiary is a promoter or enabler
• partnerships which the promoter or enabler is a part of

The government proposes that receiving a PAN would not indicate wrongdoing and would provide an opportunity for business and HMRC to work together collaboratively. For those in receipt of a PAN, under these proposals, HMRC would be able to legally share information which would allow those providing products or services to identify promoters and enablers so that they could take appropriate action.

Question 11: Do you agree that the USN and PAN proposals would help to deter and tackle tax avoidance and that the deterrent effect would be proportionate to the costs of compliance?

Question 12: Do you have any concerns or foresee any practical difficulties with the USN or PAN proposals outlined above?

Question 13: Do you have any alternative suggestions around how businesses would be able to tackle the issue of promoters using their products and/or services?

Question 14: Do you consider that the first contact letter mentioned above would support legitimate businesses to engage with HMRC?

Scope

A USN would apply across the tax avoidance market to all actions carried out by individuals and businesses that promote and enable tax avoidance whether they are connected or not. This would include all those with control or significant influence over them.

A PAN would apply to individuals and business who are providing products or services to promoters of tax avoidance who are using those products or services to facilitate the promotion of their tax avoidance schemes. Examples of relevant businesses could be banks and other providers of financial services, employment agencies, insurance businesses and businesses that promoters use to advertise (including social media businesses).

The government does not envisage that PANs would apply to legal services.

In addition, the government does not envisage that PANs would apply to products and services supplied to a suspected promoter of avoidance that have no connection to the promotion to avoidance. For example, HMRC would not be able to issue a PAN to the business supplying water to a suspected promoter’s private residence.

It is important to note that a USN or PAN is not intended to have effect on legitimate tax advice or planning unconnected to tax avoidance. Furthermore, there would be robust safeguards to ensure that anyone wrongly suspected of having failed to comply with a USN or PAN would be able to make representations and provide evidence so that no action would be taken against them.

Question 15: Do you think that the USN is appropriately targeted? If not, could you indicate where you see the issues are and how these could be resolved?

Question 16: How reasonable do you think it is for those involved in promoting or enabling tax avoidance to be expected to be aware of a universal stop notice published on GOV.UK and what more could HMRC do to ensure that all those affected by a USN are aware?

Question 17: What reasonable care/excuse arguments would be appropriate? How might these be framed to prevent promoters from abusing these aspects?

Question 18: How should the government approach defining whether a service or product provided to a suspected promoter is connected to the promotion of avoidance?

Question 19: Should the government exclude categories of products or services from the scope of the PAN, and if so, what would those be and why?

Question 20: Do you consider that a business would be able to comply with the obligations in a PAN? If not, please explain where you see the difficulties and challenges and what could be done to overcome these.

Question 21: What level and type of information do you consider would a business need to comply with a PAN?

Safeguards and protections

The government recognises it is important the right balance is struck between HMRC having effective powers and sanctions and ensuring that robust legal safeguards are in place. The safeguards outlined below would apply to failures to comply with USNs and PANs:

USNs

• the right to make representations against the suspected failure to comply with a USN
• AO to consider the representation
• the right to appeal to the Tax Tribunal for civil determinations against sanctions
• the decision to charge someone with a criminal offence will sit with an independent public prosecutor rather than with HMRC (namely the CPS in England and Wales, COPFS in Scotland, and PPS in Northern Ireland)

PANs

• the ability for the business to consider what action to take and verify information with HMRC about the customer, following the first contact letter by HMRC
• the right for representations against the issuing of a PAN to be considered by the AO
• a statutory right for the business to appeal to the tax tribunal against the issuing of a PAN
• the right to request a defined extension to the period of working with HMRC so that the business could take appropriate action to cut ties with the promoter/enabler
• if sanctions were to be introduced as a result of this consultation, the business would be able to request a review of HMRC’s decision
• a statutory right for the business to appeal to the tax tribunal against the imposition of a sanction for failing to comply with a PAN
• if a criminal offence were to be introduced it would be for breach of notice and an offence would only be committed where there is no reasonable excuse for the failure. In line with current policy, HMRC will only resort to criminal investigation where it is considered that such a response is necessary. The decision to charge someone with a criminal offence will sit with the independent public prosecutor, rather than HMRC, namely the CPS in England and Wales, COPGS in Scotland and PPS in Northern Ireland

The criminal offences for the breach of the USN or PAN would cover any breach, but HMRC’s decision to open a criminal investigation would only be made in the most serious cases, as per current policy, where HMRC needs to send a strong deterrent message or where civil investigations are ineffective. Any criminal investigation would be subject to HMRC’s governance and oversight for criminal investigations.

While HMRC may undertake a criminal investigation, the decision to prosecute would lie with the relevant prosecuting authorities. Ultimately if HMRC decided to refer a case to a public prosecutor to seek a criminal prosecution, the case would have to be proven in court to secure a criminal conviction.

The government recognises the importance of having strong internal governance for both USN and PAN cases, and HMRC would ensure that a robust governance structure was in place for considering whether to publish a USN or issue a PAN, and for identifying USN/PAN breaches and bringing action against those who fail to comply with the USN/PAN.

Question 22: Are the safeguards for USNs and PANs likely to be effective? If not, please state what could be done to enhance them.

Question 23: Do you agree that these safeguards provide the right level of protection for those who may face potential criminal prosecution? If not, what additional safeguards could be introduced?

Question 24: Are there any other safeguards that HMRC should consider to ensure the proposed power is only used in appropriate cases?

Sanctions for not complying with a USN

The USN requires proportionate sanctions which act as a strong deterrent to promoters where there is a USN in force. The government would welcome views on which of the following options would provide the best deterrent and the most suitable sanction for failing to comply with a USN. It is possible that more than one sanction would be appropriate.

Civil penalties

The government welcomes views on what would be appropriate civil penalties for failure to comply with a USN. For example, there could be a financial penalty for failure to comply with the USN, similar to the current penalty for failure to comply with a POTAS SN. Or alternatively, a penalty which considers the size of the risk posed by the scheme, in terms of the tax risk to the exchequer, and determines a penalty which is proportionate to that.

Governance processes would apply to all sanctions. A senior HMRC official who was not connected with the investigation of the promoter would initially determine the sanction. There would be a statutory right to appeal any sanction applied to the tax tribunal. All sanctions would apply to the party that failed to comply with the USN and those parties which have control or significant influence over them. Where civil penalties were determined, they would be in scope of existing joint and several liability powers.

Publication

The government proposes that HMRC would name promoters that fail to comply with the USN to provide a deterrent and so change behaviour. They would first have the opportunity to make representations about any suspected failure. These would be considered by an Authorised Officer, a senior official in HMRC who is not connected with the investigation of the promoter. This process would ensure that if a person is not a promoter and their arrangements are not caught by a USN, then their details would not be published, and no further action would be taken. This is in line with the current publishing process under POTAS SNs.

Criminal offences

One of the sanctions for failure to comply with a USN would be a strict liability criminal offence without a reasonable excuse, which is an offence regardless of a person’s intent. This is similar to current POTAS SNs where failure to comply with a SN carries an unlimited fine and/or up to 2 years imprisonment. HMRC would only resort to opening a criminal investigation in the most serious cases (see the Safeguards and Protections section).

Additional sanctions

The government would also welcome views on whether other sanctions would complement or provide a more proportionate response than the sanctions outlined above to ensure that the USN is complied with.

For example, where a person is suspected of having failed to comply with a USN, they could be required to provide a list of the clients they have sold the scheme to, similar to the current SN regime, so that HMRC are aware of the scale of the scheme promoted by the person and could communicate with the taxpayers and counteract the scheme more effectively. Any failure to comply with this could be met with a financial penalty. We welcome views on alternative sanctions that could be applied to encourage compliance with the USN.

Question 25: Do you consider the proposed sanctions for a USN are proportionate? If not, what sanctions should be applied in these circumstances?

Question 26: Do you have any suggestions regarding the basis for determining a financial penalty for a USN? What scale of penalty would you consider proportionate?

Question 27: Do you agree that failure to comply with a USN should be a criminal offence? If not, what sanction should there be and how would this deter those that are currently promoting tax avoidance schemes?

Question 28: In addition to publication, financial penalties and criminal offences, are there any other sanctions or restrictions that could be applied to promoters/enablers including those who have control or significant influence over them?

Sanctions for not complying with a PAN

The government welcomes views on the range of sanctions that would be appropriate to apply to businesses who fail to comply with a PAN. The government recognises that these sanctions need to be proportionate to the severity of the failure and would like to understand how these sanctions could be applied and in which circumstances. We anticipate that the number of businesses who would fail to comply with a PAN would be low, so the government is keen to take a measured and proportionate approach.

Question 29: Which sanctions do you consider to be proportionate for non-compliance with a PAN? If penalties were applied, what scale would you consider proportionate?

Question 30: Under which circumstances do you consider that these sanctions should be applied?

Question 31: Where a business fails to comply with a PAN, do you consider they should be named publicly as a consequence?

Question 32: Are there any circumstances where you consider a failure to comply with a PAN should be a criminal offence?

5. Stronger information powers to effectively investigate those who own and control promoter organisations

Background

A small but persistent group of individuals are behind the promotion of most tax avoidance schemes. They seek to exploit every opportunity to create avoidance schemes that sidestep the rules, depriving public services of the funding they need and leaving those who use them with large tax bills on top of the fees paid to the promoter.

Making it easier for HMRC to identify the individuals who are behind the promotion would enable HMRC to:

• publish their details on GOV.UK so potential users are warned of the risks and can identify, steer clear of and exit the schemes they promote
• issue POTAS Stop Notices directly to them and, if they fail to comply with the obligations under the Notice, issue significant civil penalties or pursue criminal proceedings
• apply to the court for winding up and/or disqualification orders which could prohibit them from being a director or from acting in the promotion, formation, or management of a company for a period of up to 15 years
• issue Joint and Several Liability notices, making them personally liable for the tax debts and penalties incurred by the companies they control when the companies have started, or are likely to start, insolvency
• take action where there are failures under the new USN proposal
• under the new PAN proposal, require businesses to stop providing products and services to promoters and enablers which are used to facilitate promotion of avoidance, such as banking services
• exchange information with other countries and fiscal authorities under the UK’s tax treaty powers so that appropriate action can be taken against promoters

The government is determined to ensure promoters face tougher consequences for their actions. The proposals outlined in this chapter seek to strengthen information powers to assist HMRC in identifying and sanctioning the persons behind the promotion of tax avoidance schemes. The government is seeking respondents’ views on how the options outlined below could best meet their respective objectives.

Connected Parties Information Notice

Current position and issues

To conceal their involvement from HMRC and attempt to avoid consequences, the individuals behind the promotion of tax avoidance schemes rarely offer their services directly. Avoidance schemes are often delivered through complex structures. The promoter behind the scheme, or controlling mind, operates through various entities, often inserting others in their place, for example stooge directors or shadow directors. When HMRC challenges these arrangements, entities often cease with the promoter setting up new vehicles to continue the sale of schemes which continue to harm the tax system.

The sophistication and breadth of tax avoidance promoter structures often mean that there is a wider circle of persons with some involvement in the promoter activities. These persons may hold relevant information or documents that could assist HMRC in its investigations and help it identify those who ultimately control the structure. However, obtaining evidence from these parties is not always easy.

At present, sanctions under HMRC’s existing information powers do not always provide a sufficient deterrent against non-compliance. It is common for those who control promoter structures to attempt to dictate the responses others in the structure give to HMRC’s requests for information. This frustrates HMRC’s investigations and allows them to continue to promote their schemes for longer. Slow, partial or misleading or no responses reduce the effect of HMRC’s powers to stop the promotion of schemes and protect the tax system from harm.

Example 1: Complex promoter structure

1. An end client contracts an employment agency to recruit workers.

2. The employment agency outsources payroll responsibility to umbrella companies A, B, C and D.

3. The umbrella companies act as the legal employer and pay the workers. They must operate PAYE on any payments of earnings made. However, in this case, only a small part of the payment the workers (users of the scheme) receive is declared as PAYE.

4. The umbrella companies have paid companies E, F and G for back office/administration services. However, it appears that any real activity is carried out by a promoter entity.

5. HMRC suspects that companies E, F and G transfer payments to the promoter entity and the controlling minds. Current information powers have only allowed HMRC to obtain information and documents for stages 1 to 4.

6. The controlling minds put themselves beyond reach by hiding behind all the other entities. This can be via a corporate veil or the use of stooge directors.

Proposed changes

The government is proposing introducing a targeted Connected Parties Information Notice (CPIN) which would compel persons that HMRC suspects to be connected to the promotion of a marketed tax avoidance scheme to provide relevant information and documents. It is proposed there would be strong sanctions for non-compliance.

The proposal aims to ensure HMRC can obtain information that would help it understand the operation of avoidance schemes at an early stage; deploy, monitor and enforce compliance with existing and proposed anti-avoidance powers; and identify the persons behind the promoter structures so that action can be taken against them.

Under this proposal, HMRC would be able to issue first- and third-party information notices to and in respect of ‘relevant persons’ to enable it to more effectively deploy its anti-avoidance powers.

Relevant person

A ‘relevant person’ would include persons who HMRC suspects are or have been:

• promoters, including the individuals and entities that control or influence the promoter and others that are part of the promoter structure

• individuals and entities who are involved in the supply of the arrangements or who benefit from the proceeds of the promotion (whether that benefit is channelled directly from the ultimate promoter or is channelled indirectly)

The government is considering an extension to the current categories of persons treated as a promoter to better capture controlling minds and others within the promoter structure.

Question 33: Do you have any views on who should or should not be covered by the CPIN proposal?

Information that HMRC would be able to request

Persons in receipt of the information notice would be required to provide information and/or documents in their possession or power that are reasonably required by HMRC for the deployment, monitoring and enforcement of its anti-avoidance powers within a timeframe specified in the notice.

Persons issued with a CPIN would not be required to provide material subject to Legal professional privilege or other excluded material (see Sch 36 CH22100 Information and Inspection Powers: Conditions and safeguards – Restrictions).

Sanctions for failure to comply with a CPIN

Failure to comply with a CPIN in full (for example, by not providing all information or documents requested in the notice without a reasonable excuse), providing false or misleading information, concealing, destroying or otherwise disposing of documents would result in a sanction. This could include a criminal offence or civil penalties.

The government proposes a twofold approach of civil penalties and a criminal offence. This would reinforce the importance of complying with HMRC’s information requests and provide a strong deterrent across the avoidance market. It would also give HMRC the opportunity to choose the most appropriate sanction depending on the scale and seriousness of non-compliance based on the circumstances of each case.

Criminal sanction

A criminal offence for concealing, destroying or otherwise disposing of documents which are, or HMRC has advised may be, required by a Tribunal-approved information notice, is already a feature of HMRC’s information powers.

This proposal expands the circumstances in which a criminal offence may be committed to include failure to comply with a CPIN in full without a reasonable excuse or providing false or misleading information.

In the case of a CPIN, this would be irrespective of whether the CPIN has been approved by a Tribunal or not. This would send a clear message to those connected to the promotion of tax avoidance: misleading HMRC or attempting to obstruct investigations is unacceptable.

Conviction for failing to comply with a CPIN, providing false or misleading information or concealing, destroying, or otherwise disposing of documents required by the notice would result in a fine, imprisonment for a term of up to two years, or both.

Civil penalties

Where criminal prosecution is not appropriate, CPIN failures would result in a civil penalty. The government is currently considering what would be appropriate CPIN civil penalties. Any sanctions would need to be sufficiently large to act as a deterrent without being disproportionate.

We welcome views on how sanctions for CPIN failures could best encourage compliance with the information notice.

Question 34: Do you agree that a criminal offence should be a potential consequence for failure to comply with a CPIN or providing false or misleading information?

Question 35: Do you have views on how to set civil penalties at a level which would encourage compliance from parties connected to the promotion of marketed tax avoidance schemes?

Question 36: Do you have any suggestions for alternative or additional proportionate potential consequences for non-compliance with a CPIN?

Safeguards and protections

The government recognises it is important the right balance is struck between HMRC having effective information powers and ensuring robust safeguards and governance processes are in place.

The proposed information power would broadly apply the safeguards already contained within Schedule 36 to Finance Act 2008. Additionally, HMRC would ensure that there is a robust internal governance structure in place around the use of the information notice.

HMRC would be able, depending on the circumstances of a case, to issue first and third-party information notices without approval, or seek the approval of a First Tier Tribunal to do so. As per Schedule 36, an HMRC-issued CPIN would carry a right of appeal to the Tribunal and a Tribunal-approved CPIN would not carry a right of appeal.

A person will not be liable to a penalty or have committed an offence if they have a reasonable excuse for failing to comply with the information notice and they remedy that failure without unreasonable delay after the excuse ends. There is no statutory definition of reasonable excuse, which is a matter to be considered in the light of all the circumstances of a particular case.

Criminal prosecutions for CPIN failures would be reserved for serious cases, where HMRC need to send a strong deterrent message, or where civil penalties would be ineffective. Any criminal investigation would be subject to HMRC’s governance and oversight for criminal investigations. The guidance covering this is published on GOV.UK.

Where a decision is made to seek a criminal prosecution, HMRC would have to prove its case in court to secure a criminal conviction.

Question 37: Do you agree that these safeguards provide the right level of protection for recipients of the notice? If not, what additional safeguards could be introduced?

Question 38: Are the safeguards for this measure likely to be effective? If not, please state what could be done to enhance them.

Promoter Financial Institution Notice (PFIN)

Where an avoidance scheme is new, emerging or actively being promoted, the government can see advantages to HMRC being able to obtain bank statements or other financial information for the promoter, group, entity or controlling minds, from banks and other financial institutions (FIs) without requiring Tribunal approval. This is to track the flow of money through the scheme, determine the final destination of monies generated and to trace payments back to source. Overall, this will help HMRC to quickly demonstrate legislative tests for DOTAS, POTAS and other anti-avoidance measures are met.

Following consultation in 2018, a non-avoidance Financial Institution Notice (FIN) was introduced requiring FIs to provide information to HMRC when requested about a specific taxpayer, without the need for approval from the independent tribunal that considers tax matters. The FIN, introduced in the Finance Act 2021, allows HMRC to request information about a financial institution’s customers for the purposes of domestic or overseas tax investigations.

Based on the FIN, the government now proposes a PFIN, which would allow HMRC to obtain access to promoters of tax avoidance financial or banking data held by FIs without approval from the independent tribunal. Information received in response to a PFIN would be used for the purpose of checking the obligations of a promoter were being met, establishing and evidencing compliance with the proposed USN power and undertaking activity in relation to the proposed PAN.

Main difference between the FIN and the PFIN proposed

The FIN is used to check the tax position of a taxpayer (or to obtain information for the purpose of collecting a tax debt of that taxpayer) whereas the PFIN is targeted towards seeking financial information about the promoter and/and controlling minds who have significant influence over the activity of a promoter entity. The PFIN would be used to confirm the existence of avoidance schemes, associated connected parties and controlling minds, which is not a valid reason for issuing a FIN.

The PFIN could aid the imposition of penalties imposed under DOTAS and POTAS and, following this, provide information to support applications for freezing orders under the legislation at S87 FA22. It could also reduce on average by 1 to 2 months the time it takes to disrupt a new promoter umbrella, shortening their opportunity to accumulate fee income from their promotion of schemes.

Before issuing a FIN, HMRC usually first try to obtain the information from the person whose tax position they are checking but this would not be the case with a PFIN.

Other benefits for issuing a PFIN

• would help HMRC identify businesses providing products and services to promoters so that they can take appropriate action in relation to a PAN request
• would assist with establishing breaches of new or existing anti avoidance legislation
• would help HMRC better quantify and detect unpaid PAYE amounts owed by employer companies operated by the promoter
• would help HMRC determine the movement and destination of funds and could lead to the identification of controlling minds behind promoter structures
• would help HMRC identify links to other promoter group entities
• would help HMRC identify payments to non-employee individuals suspected of receiving payments related to enabling the avoidances scheme, such as ‘bonus’ or other payments made to individuals at recruitment agencies to reward them for introducing users

Question 39: What are your views on extending obligations under information powers as indicated by the PFIN proposal?

Scope of the PFIN

FIs, such as banks and building societies, might be asked for information for the purposes of checking a promoter’s activities related to the promotion of an avoidance scheme or schemes.

Banking information would be defined to include bank statements, information about the promoter transactions on the account and information held about the legal and beneficial ownership of the account. It is accepted that it may be difficult in some cases to identify financial accounts as some promoters seek to hide these. A way of identifying accounts would be the payment platform used for PAYE or VAT payments.

You can see HMRC FIN guidance on GOV.UK.

Question 40: Are issues envisaged around defining FIs – for example, in relation to alternative ‘payment platforms’? How might HMRC overcome such problems?

Sanctions or failure to comply with a PFIN

Failure to comply with a PFIN would result in penalties levied on the FI, against which there would be a right of appeal. This would mirror sanctions for the FIN. To date, no issues, concerns or complaints have been raised by FIs regarding the number of FINs currently being issued or that the information requested in any FIN has been onerous.

Under these proposals the FI must not disclose for 12 months the requirements in a PFIN. Any FI breaches of this requirement will incur a penalty, with the usual appeal rights. A PFIN can be extended or withdrawn on approval from an authorised officer.

You can see FIN statistics on GOV.UK.

Safeguards and protections

The PFIN would be balanced by several safeguards, (some carried over from the FIN) including:

• a requirement of reasonable suspicion that the promoter has sold or is selling an avoidance scheme, complex structures are in place to facilitate the promotion of tax avoidance scheme arrangements or there’s evidential history of promoter non-compliance and repeat promoter offences or both
• akin to the FIN (though for a different purpose), there would be reasonable grounds for requiring the information or documents and they would not be onerous for the FI to provide
• financial information subject to legal professional privilege would not be required
• an authorised officer of HMRC (someone with the relevant experience and training) would need to approve the decision to issue a PFIN

Question 41: Should this power be subject to any additional restrictions or safeguards? If so, please state the restrictions or safeguards.

Question 42: Do you have any other ideas for options that could deliver both the objective of speeding up the process for obtaining promoters’ financial information and providing appropriate safeguards?

Question 43: Do you have any views on the requirement described above that aims to prevent the third party from notifying the promoter of the information request as described? Do you have any suggestions about any other ways that this aim could be achieved?

6. Legal professionals

Background

A small number of legal professionals design and promote avoidance schemes themselves, assist in the design of schemes for promoters or provide legal advice that supports promoters to market tax avoidance schemes. Where this happens, the activity of the legal professionals is often protected by legal professional privilege (LPP) leaving HMRC unable to effectively challenge these schemes.

To ensure everyone who facilitates tax avoidance is held to account, the government is considering options to expand transparency in this space.

The government acknowledges the vast majority of legal professionals offer a valuable service to their clients when they provide them with legal advice and representation. However, HMRC has been made aware of situations where legal professionals have been involved in the creation, design and subsequent promotion of tax avoidance schemes. The legal professionals in question provide design or other advice to promoters that explains the mechanics of how a tax avoidance scheme operates and sets out how, in their view, it complies with the law. However, HMRC has seen many instances where such schemes have failed and there appears to be no tenable basis for holding this initial view of how the legislation in question operated. The advice will often:

• advise that the scheme is not notifiable under DOTAS, underpinning the promoter’s decision to act on the basis they do not need to disclose the scheme
• fail to properly assess the likely effectiveness of the arrangements
• fail to highlight the counter arguments as to why the scheme may not work
• fail to explain how HMRC could challenge the scheme and issue scheme users with assessments for unpaid tax and penalties

While HMRC already has significant powers to tackle those that promote tax avoidance, some of the relevant powers exclude privileged advice provided by legal professionals. Whilst it is important that taxpayers can obtain confidential advice from lawyers, the enhanced protection LPP provides can be used to make it difficult for HMRC to tackle the very small number of legal professionals that have become involved in designing, promoting or facilitating the promotion of these schemes.

There is a case for ensuring that HMRC’s existing powers to tackle promoters of tax avoidance can apply to legal professionals (but with their ability to give privileged advice retained, albeit subject to the following proposals), whilst ensuring that the wider legal profession can continue to provide confidential and unencumbered advice to their clients.

The government is therefore looking to make targeted changes that will ensure that legal professionals can continue to carry out their work and advice effectively, without providing protection to those who design, promote or facilitate tax avoidance. It will ensure that HMRC can take targeted action against legal professionals that facilitate the promotion of avoidance schemes as well as promoters that seek to exploit questionable legal advice to market tax avoidance schemes.

The government proposes several steps to address this problem. These are:

• changes to the DOTAS legislation in respect of legal professionals that promote tax avoidance schemes
• targeted changes to legislation on publishing tax avoidance in respect of legal professionals that design tax avoidance schemes
• introducing a deemed waiver of LPP in certain circumstances where promoters market their schemes on the basis that they have been endorsed by a legal professional
• engaging with regulators and professional bodies in the legal sector, including the Bar Standards Board, so they have the information to help them enforce their standards for members involved in promoting, enabling or implementing tax avoidance schemes
• to make clearer HMRC’s view when LPP does not apply, with the aim of limiting the circumstances where promoters will attempt to withhold information from HMRC

Disclosure of avoidance scheme by legal professionals who promote tax avoidance schemes

The DOTAS rules require those who promote and supply certain tax arrangements and proposals to disclose these arrangements to HMRC when:

• a tax advantage is a main benefit
• it is covered by at least one hallmark

Under DOTAS no person is required to disclose information to HMRC that is protected by legal professional privilege. This exclusion is in primary legislation.

Further to this, under regulation 6 of SI 2004/1865 legal professionals are deemed not to be promoters for any purpose under DOTAS where LPP would prevent them from being able to comply in full with a promoter’s disclosure obligations. This means that even where, as well as providing advice on a scheme, the legal professional also carries out promotion activities that do not attract privilege, such as organising and managing arrangements which might include making contracts with end users or administering scheme transactions, the professional is not treated as a promoter for the purposes of DOTAS. Therefore, even if most of their activity relating to a scheme would not attract LPP, the legal professional would be exempted from complying with any obligation imposed on promoters by DOTAS in relation to a scheme if they had provided privileged legal advice on it.

These exclusions were included when DOTAS was first introduced. Given the involvement of legal professionals in promoting tax avoidance schemes that goes beyond the provision of legal advice, these exclusions may now be providing cover for a small number of legal professionals to escape all consequences of the scheme falling within scope of DOTAS.

The government therefore proposes keeping the exclusion from disclosing information subject to LPP in primary legislation but removing the exemption in regulation 6. Making this change would send a signal to the small number of legal professionals that promote schemes, that the government wishes to take action to address this issue.

This change would enable HMRC to publish under certain DOTAS publishing powers the details of legal professionals who promote schemes. Although presently HMRC mainly rely on section 86 of Finance Act 2022 (s86 FA22) to publish the details of tax avoidance schemes and those that promote them, so it would be more likely that they would be published under this power. Please see below for more details on how we might amend our publishing powers to allow HMRC to publish the details of legal professionals involved in designing schemes.

Question 44: Should Regulation 6 be repealed?

Question 45: Are there any risks in making such a change? For example could the change bring into scope those that we might not wish to include?

Question 46: Does the government’s proposal to retain the statutory protection for LPP material in primary legislation provide an adequate safeguard?

Publishing the names of legal professionals who design tax avoidance schemes

Since April 2022 HMRC has been publishing information about tax avoidance schemes and those that promote them. As of the end of 2024 HMRC had published 135 schemes on GOV.UK and there is evidence that by doing this HMRC is not only supporting taxpayers to steer clear of these schemes but is also having a disruptive impact on the promoter market with many schemes closing down shortly after publication.

The main publishing power that HMRC uses is s86 FA22. This power allows HMRC to name schemes and promoters and to publish more information about the scheme and those involved with promoting it. For example, HMRC can publish the details of individuals that are connected persons such as directors and ultimate beneficial owners of promoting entities. By the end of 2024 HMRC had named 50 such individuals on GOV.UK.

In publishing legislation, the term ‘promoter’ includes those that have any responsibility for designing these schemes. In the publishing legislation, a legal professional would be a designer when providing legal advice on a scheme if the advice they provide is used in the design of the scheme. Advice is used in a design if:

• the legal advice includes suggestions about how the legal professional’s promoter client could modify the proposed arrangements in order to achieve a tax advantage
• the promoter incorporates that suggestion into the scheme it sells to its clients
• the promoter arrangements are relevant arrangements

However, a legal safeguard contained in publishing legislation prevents HMRC from being able to publish the details of scheme designers if they are a legal professional. This means HMRC are often unable to highlight legal professionals who have played a significant role in designing the scheme.

This safeguard prohibits publication where there are “reasonable grounds for believing that the person’s role in relation to a proposal or arrangements is limited to activities subject to legal professional privilege”.

This means that HMRC is unable to publish information about a legal professional where their only activity in relation to a scheme is to provide advice on the design of the scheme that is subject to LPP, as the safeguard would apply.

The government proposes widening the scope of the publishing powers to allow HMRC to publish legal professionals’ details where they have been part of designing a tax avoidance scheme when the role of the legal professional is limited to activity subject to LPP. We will look to make changes to both s86 FA22 and DOTAS legislation to enable HMRC to publish the details of legal professionals that design schemes for a promoter.

Under this proposal we are not planning on making any amendment that would allow us to publish any legal advice that is subject to LPP. However, there may be occasions where LPP has either been waived because the client (the promoter) has shared the advice with others (scheme users) or due to the iniquity exception, under which no LPP arises as the legal professional’s advice was sought to further a crime, fraud or equivalent conduct. Other proposals in this consultation may also lead to LPP being deemed to have been waived. Where LPP does not apply HMRC would be able to share the advice of legal professionals.

It would be expected that the information that would be published could include the names of legal professionals, as well as their relevant regulator’s reference number, and where appropriate the firm where they are based. This information would be used to warn taxpayers about the risks posed by these legal professionals who are also acting as designers of tax avoidance.

This information would be published on GOV.UK alongside the names of other tax avoidance schemes and promoters and would alert potential scheme users to the fact these legal professionals are involved in devising tax avoidance schemes.

Additionally, or alternatively, using existing legislation HMRC could share the information (or more detailed information) with the relevant representative body, such as the Bar Standards Board, so that they are aware of the behaviour of their members. Sharing this information would allow the representative body to investigate and take appropriate action under their codes of conduct should they conclude that the legal professional had breached their rules.

Question 47: Should the rules on publishing be changed to allow HMRC to publish the names of legal professionals that design tax avoidance schemes, even when most of or all their activity is subject to legal professional privilege?

Question 48: Could there be any unintended consequences from making this change?

Question 49: If the government does change the rules, as per question 47, how should HMRC utilise this information to assist taxpayers and representative bodies?

Safeguards

In terms of safeguards HMRC would use the existing safeguards that are currently used for its publishing powers, including s86 FA22. These include:

• a robust governance process with input from technical leads and lawyers before publishing
• a 30 day opportunity for those that we intend to name to provide representations as to why their details should not be published or disclosed
• any decision to publish would be made by an Authorised Officer, who is a member of the Senior Civil Service and based outside the directorate of the investigating officer
• a public law right to apply for interim relief and seek judicial review, or both, against HMRC’s decision to publish information identifying a business or individual

The above safeguards have proved effective for existing publishing powers and ensured only persons within scope of the legislation have been named. As of the end of 2024 HMRC had faced 14 legal challenges against decisions to publish the names of promoters and their schemes and HMRC were successful in all of them.

We understand that one of the concerns for legal professionals could be that LPP might prohibit them from making full representations as to why they are not a promoter of a tax avoidance scheme and that their details should not be published. We would be grateful for the views of respondents on how best to address this matter.

Question 50: How should we deal with the issue of representations against publishing the details of a legal professional who has designed a scheme when LPP applies?

An LPP waiver in respect of promoters who utilise legal opinions to market schemes

One common way that tax avoidance schemes have been marketed is to highlight that the efficacy of the scheme is supported by a legal opinion, usually from a KC. Promoters do this to attempt to reassure potential scheme users that entering the arrangements is low risk. Unfortunately, whilst many schemes are purported to have legal advice that seemingly supports the arrangements, when challenged, the courts find that the vast majority of these schemes do not work. This calls in to question how robust the original advice was.

To address this issue, we propose introducing a deemed waiver of LPP in certain circumstances where a promoter markets a tax avoidance scheme and when doing so highlights that the scheme is supported by a legal opinion. In these circumstances LPP would be automatically waived and the promoter would be required to disclose the legal advice to HMRC if compelled by an information power to do so. Having this information might allow HMRC to challenge some of the promoter’s claims about the scheme with regards to the legal advice they have received. It may, under existing powers, also allow HMRC to publish the details of these legal professionals alongside the scheme information and names of the promoters, and potentially the legal advice, on GOV.UK. Where appropriate to do so, HMRC could share this information with the relevant regulatory bodies such as the BSB or SRA, who could then decide whether to take action.

Question 51: Would you support the introduction of a deemed waiver of LPP?

Question 52: In which circumstances should LPP be waived?

Question 53: Could a deemed waiver of LPP have any unintended consequences?

Question 54: If you support a deemed waiver, do you consider that it should be a waiver for all purposes or only limited ones? If the latter, what purposes?

Question 55: Are there other things HMRC should do to address instances where promoters rely on dubious legal advice to market avoidance schemes, or use legal advice to market avoidance schemes to persons to whom the advice was not given?

Engagement with the legal sector

HMRC has a statutory authority, in section 20 of the Commissioners for Revenue and Customs Act 2005 (CRCA), to disclose information in certain prescribed circumstances, where such a disclosure would be in the public interest. This includes disclosure to a professional regulatory body, such as those covering the legal sector, of information relating to misconduct by a member of the body.

HMRC intends to engage with the legal regulatory bodies to discuss the operation of their codes of conduct and how HMRC can better support them to take the most effective appropriate action against their members when they are breaching these rules. HMRC wishes to ensure that, in future, members of the legal profession do not design, promote or otherwise enable tax avoidance schemes where there is no tenable basis for the view that the scheme would work.

Making clear HMRC’s position on when LPP does not apply

Another problem that HMRC faces is claims that certain documents are privileged when they are not, purely to prevent HMRC from obtaining relevant information about tax avoidance schemes.

The process for a Tribunal to determine whether documents or information requested by HMRC are privileged is set out in The Information Notice: Resolution of Disputes as to Privileged Communications Regulations. These regulations relate to the exercise of powers conferred on HMRC in Schedule 36 to the Finance Act 2008.

The regulations set out the rules for when there is a dispute between HMRC and a person to whom an information notice has been given with regards to whether a document is privileged. It is available to accelerate resolution of disputes concerning privilege when an information notice has been given, for example under POTAS or enablers powers.

The regulations do not explicitly address what principles HMRC should apply when determining if information is privileged. However, there are well-established reasons as to why a document or information would not be subject to LPP, such as when:

• the activity is outside the scope of LPP – for example if no legal advice has been provided
• the iniquity exemption applies as the document has been used for the purpose of a crime, a fraud or an equivalent behaviour
• LPP has been waived by the recipient of the legal advice. For example, if the legal advice has been shared in such a way as to cause privilege to be lost

Given that this is a particular issue with regards to promoters of tax avoidance, we intend to draft new guidance aimed at those involved in promoting or enabling tax avoidance, as well as their legal representatives. The new guidance will set out HMRC’s position on the circumstance when LPP applies and when it does not apply and include information on any new waivers from LPP introduced following this consultation. Such guidance will provide a clear signal of how HMRC intends to approach disputes relating to LPP. By providing such guidance HMRC should be in a better position to determine which information should be disclosed and challenge inappropriate claims of privilege before the tribunal, which should assist with the other measures referred to in the paragraphs above.

Question 56: Is there any further action that HMRC should be taking to tackle those legal professionals that are involved in the promotion of tax avoidance?

7. Future direction

Introduction

The government wants to make it clear that promoting tax avoidance schemes is unacceptable, now and going forward. It is continuing to consider additional new and impactful ways to close down this activity and prevent those responsible from causing further harm to the tax system.

The significant and robust measures outlined in the previous chapters will form an essential part of that, but the government wants to go further and provide new tools for HMRC to clamp down more forcefully on promoters of tax avoidance schemes.

This will ensure that the government remains on the front foot, rooting out and closing down further avenues for promoting avoidance. It is committed to legislating where necessary without delay.

To achieve this, the areas which the government continues to explore include:

• ensuring that non-compliant promoters face significant consequences including creating new offences leading to criminal prosecutions
• providing HMRC with the tools needed to act quickly and decisively
• fully optimising advances in technology to ensure the maximum impact of HMRC’s compliance activities

Ensuring that promoters face significant consequences

As set out in chapter 5, controlling minds and key players (those that exert significant influence) within promoter organisations continue to look for ways to avoid the consequences of their actions, often trying to hide their involvement through the use of corporates or by locating themselves overseas.

The government is considering how additional sanctions will increase the risks involved for those who ultimately control the promoter structures and the changes required to land real effective consequences on these individuals. Civil penalties will continue to play an important role in deterring promoters from breaching anti avoidance rules as they can be levied and pursued more quickly. However, given the nature of the avoidance market and the persistent non-compliance from a group of resilient and elusive promoters, it will likely take the strongest of sanctions to have the required effect. Accordingly, the government is giving further consideration to the use of criminal sanctions and lifestyle restrictions to deter promoters and deliver significant consequences.

These scenarios of persistent non-compliance build the justification for thinking only the risk of a custodial sentence, a criminal fine or lifestyle restrictions, such as travel or driving restrictions, will provide a genuine deterrent. In line with this thinking, the government is reviewing whether there are any existing HMRC powers targeted at promoters which could be strengthened by adding more impactful consequences. Such consequences would need careful targeting and appropriate safeguards.

Chapter 3 details the government’s intention to make failing to disclose under DOTAS a criminal offence. The aim in going further would be to add similar consequences to other key obligations on the promoter. The message will be clear – comply with your obligations or face the very real risk of criminal sanction. In addition, the government will continue to consider new criminal offences for non-compliance with any new powers or legal requirements targeted at promoters.

Question 57: Are there any existing powers targeted at promoters which could be strengthened with the addition of new criminal offences for non-compliance?

Question 58: In what other situations would criminal sanctions be appropriate for undeterred promoters?

Question 59: What in your view are the type of sanctions that would deliver the aim of significantly disrupting the lifestyles of controlling minds?

Providing HMRC with the tools needed to act quickly and decisively

DOTAS remains an important tool for tackling promoters. DOTAS has benefited from a number of changes since its inception that have sought to ensure it keeps up with the developing avoidance market. The DOTAS hallmarks that underpin DOTAS were last updated in 2018. The government is considering whether further changes are required, in addition to those proposed in chapter 3, to expand the scope of DOTAS to ensure that promoters cannot sidestep the requirements. The aim is to make sure DOTAS continues to have the scope needed to keep up with the types of avoidance that are being developed and sold.

Minimising the amount of time when promoters are able to sell their schemes, whilst HMRC compiles the necessary evidence to counteract them, will likely decrease the harm that the schemes cause to both the tax system and those that use them. The ability to levy civil penalties on promoters quickly for non-compliance remains an important tool for landing early consequences in the form of a debt on the promoter. Crystalising this liability on the promoter opens up additional HMRC powers which can be used for debt collection. HMRC is reviewing its processes and exploring if it can pursue these debts from promoters at an earlier point.

Chapter 5 explores the measures currently being taken forward to improve the information available to HMRC. The government is exploring further additional ways to obtain information both directly and indirectly from third parties that in turn would reduce the time needed to close the schemes down. This includes building on existing relationships and establishing new partners. Particular areas of interest are closer working with Companies House to ensure more efficient exchange of data and intelligence, and establishing new gateways with banks to exchange information and obtain early sight of promoter transactions.

Question 60: What further changes could be made to DOTAS to capture a wider range of tax avoidance?

Question 61: How can HMRC ensure that it obtains information from third parties in a timely fashion?

Fully optimising advances in technology to ensure the maximum impact of HMRC’s actions

HMRC is exploring ways to maximise advances in technology such as AI to extend and speed up Counter Avoidance policy, risking and compliance functions. This work is in step with the government’s recently announced AI Opportunities Action Plan. In the first instance HMRC is looking at using these advances to sift through large data sets to help identify avoidance activity and to summarise key information. The government is considering whether additional legislation would complement this work to gain even more out of this technology as it advances.

The government is aware of the speed at which this technology is evolving and remains alive to the risk that the avoidance industry may in turn seek to exploit it. To address this HMRC will retain this area as a permanent policy workstream to ensure any new developments can be fully optimised to tackle promoters and the tax gap.

Question 62: How best do you think HMRC can use advances in technology including AI to aid its work tackling marketed tax avoidance?

8. Assessment of impacts

Exchequer Impact Assessment

Any exchequer impact of these proposals will be assessed following consultation, final scope and design.

Year	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2020
Exchequer impact (£m)	+/- TBC	+/- TBC	+/- TBC	+/- TBC	+/- TBC	+/- TBC

Summary of non-Exchequer impacts

Impacts	Comment
Economic impact	Publication of this consultation is not expected to have any significant macroeconomic impact. Any economic impact of these proposals will be estimated following consultation, final scope and design, and will be subject to scrutiny by the Office for Budget Responsibility.
Impact on individuals, households and families	Publication of this consultation is not expected to have any significant impact. Any impact of these proposals will be further assessed following consultation, final scope and design. At this stage, the government anticipates significant impacts on promoters who are subject to civil or criminal sanctions, and no significant impacts on households or families.
Equalities impacts	Publication of this consultation is not expected to have any significant impact. Any impact of these proposals will be further assessed following consultation, final scope and design. At this stage, the government does not anticipate significant equalities impacts.
Impact on businesses and Civil Society Organisations	Publication of this consultation is not expected to have any significant impact. Any impact of these proposals will be further assessed following consultation, final scope and design. At this stage, the government anticipates a small impact on businesses in receipt of the PAN, but that this will be limited as HMRC will use it to target a very small number of promoter groups (20-30).
Impact on HMRC or other public sector delivery organisations	Publication of this consultation is not expected to have any significant impact. Any impact of these proposals will be further assessed following consultation, final scope and design. At this stage, the government anticipates some operational impact on HMRC and a small operational impact on the court system.
Other impacts	Publication of this consultation is not expected to have any significant impact. Any impact of these proposals will be further assessed following consultation, final scope and design. At this stage, the government has considered other impacts and not identified any other impacts.

9. Summary of consultation questions

Question 1: What other ideas, in addition to the ones in this document, should the government consider to deliver its intent of closing in on promoters of marketed avoidance?

Question 2: Is there more HMRC can do to support those who use tax avoidance schemes?

Question 3: Do you think there are features of disguised remuneration schemes that could feature in a new DOTAS hallmark that makes it clearer that disclosure is required and reduces the burden on HMRC of sanctioning non-compliance?

Question 4: For the purposes of this DOTAS hallmark, should consideration be given to any specific exclusions, for example reimbursement of certain employment related expenses?

Question 5: Are there other areas or arrangements where a new DOTAS hallmark would help the government tackle marketed tax avoidance?

Question 6: Do you agree that the twofold approach of civil penalties and a criminal offence will provide a stronger deterrent?

Question 7: Should the criminal offence be restricted to schemes where there is a promoter acting?

Question 8: What reasonable care/excuse arguments would be appropriate? How might these be framed to prevent promoters from abusing these aspects? What reasons should be excluded from reasonable excuse?

Question 9: Do you agree that moving the issuing of DOTAS penalties from the Tax Tribunal to HMRC (appealable to the Tax Tribunal) is appropriate?

Question 10: Are there any other changes to DOTAS penalties HMRC should consider?

Question 11: Do you agree that the USN and PAN proposals would help to deter and tackle tax avoidance and that the deterrent effect would be proportionate to the costs of compliance?

Question 12: Do you have any concerns or foresee any practical difficulties with the USN or PAN proposals outlined above?

Question: 13: Do you have any alternative suggestions around how businesses would be able to tackle the issue of promoters using their products and/or services?

Question 14: Do you consider that the first contact letter mentioned above would support legitimate businesses to engage with HMRC?

Question 15: Do you think that the USN is appropriately targeted? If not, could you indicate where you see the issues are and how these could be resolved?

Question 16: How reasonable do you think it is for those involved in promoting or enabling tax avoidance to be expected to be aware of a universal stop notice published on GOV.UK and what more could HMRC do to ensure that all those affected by a USN are aware?

Question 17: What reasonable care/excuse arguments would be appropriate? How might these be framed to prevent promoters from abusing these aspects?

Question 18: How should the government approach defining whether a service or product provided to a suspected promoter is connected to the promotion of avoidance?

Question 19: Should the government exclude categories of products or services from the scope of the PAN, and if so, what would those be and why?

Question 20: Do you consider that a business would be able to comply with the obligations in a PAN? If not, please explain where you see the difficulties and challenges and what could be done to overcome these.

Question 21: What level and type of information do you consider would a business need to comply with a PAN?

Question 22: Are the safeguards for USNs and PANs likely to be effective? If not, please state what could be done to enhance them.

Question 23: Do you agree that these safeguards provide the right level of protection for those who may face potential criminal prosecution? If not, what additional safeguards could be introduced?

Question 24: Are there any other safeguards that HMRC should consider to ensure the proposed power is only used in appropriate cases?

Question 25: Do you consider the proposed sanctions for a USN are proportionate? If not, what sanctions should be applied in these circumstances?

Question 26: Do you have any suggestions regarding the basis for determining a financial penalty for a USN? What scale of penalty would you consider proportionate?

Question 27: Do you agree that failure to comply with a USN should be a criminal offence? If not, what sanction should there be and how would this deter those that are currently promoting tax avoidance schemes?

Question 28: In addition to publication, financial penalties and criminal offences, are there any other sanctions or restrictions that could be applied to promoters/enablers including those who have control or significant influence over them?

Question 29: Which sanctions do you consider to be proportionate for non-compliance with a PAN? If penalties were applied, what scale would you consider proportionate?

Question 30: Under which circumstances do you consider that these sanctions should be applied?

Question 31: Where a business fails to comply with a PAN, do you consider they should be named publicly as a consequence?

Question 32: Are there any circumstances where you consider a failure to comply with a PAN should be a criminal offence?

Question 33: Do you have any views on who should or should not be covered by the CPIN proposal?

Question 34: Do you agree that a criminal offence should be a potential consequence for failure to comply with a CPIN or providing false or misleading information?

Question 35: Do you have any views on how to set civil penalties at a level which would encourage compliance from parties connected to the promotion of marketed tax avoidance schemes?

Question 36: Do you have any suggestions for alternative or additional proportionate potential consequences for non-compliance with a CPIN?

Question 37: Do you agree that these safeguards provide the right level of protection for recipients of the notice? If not, what additional safeguards could be introduced?

Question 38: Are the safeguards for this measure likely to be effective? If not, please state what could be done to enhance them.

Question 39: What are your views on extending obligations under information powers as indicated by the PFIN proposal?

Question 40: Are issues envisaged around defining FIs – for example, in relation to alternative ‘payment platforms’? How might HMRC overcome such problems?

Question 41: Should this power be subject to any additional restrictions or safeguards? If so, please state the restrictions or safeguards.

Question 42: Do you have any other ideas for options that could deliver both the objective of speeding up the process for obtaining promoters’ financial information and providing appropriate safeguards?

Question 43: Do you have any views on the requirement described above that aims to prevent the third party from notifying the promoter of the information request as described? Do you have any suggestions about any other ways that this aim could be achieved?

Question 44: Should Regulation 6 be repealed?

Question 45: Are there any risks in making such a change? For example could the change bring into scope those that we might not wish to include?

Question 46: Does the government’s proposal to retain the statutory protection for LPP material in primary legislation provide an adequate safeguard?

Question 47: Should the rules on publishing be changed to allow HMRC to publish the names of legal professionals that design tax avoidance schemes, even when most of or all their activity is subject to legal professional privilege?

Question 48: Could there be any unintended consequences from making this change?

Question 49: If the government does change the rules, as per question 47, how should HMRC utilise this information to assist taxpayers and representative bodies?

Question 50: How should we deal with the issue of representations against publishing the details of a legal professional who has designed a scheme when LPP applies?

Question 51: Would you support the introduction of a deemed waiver of LPP?

Question 52: In which circumstances should LPP be waived?

Question 53: Could a deemed waiver of LPP have any unintended consequences?

Question 54: If you support a deemed waiver, do you consider that it should be a waiver for all purposes or only limited ones? If the latter, what purposes?

Question 55: Are there other things HMRC should do to address instances where promoters rely on dubious legal advice to market avoidance schemes, or use legal advice to market avoidance schemes to persons to whom the advice was not given?

Question 56: Is there any further action that HMRC should be taking to tackle those legal professionals that are involved in the promotion of tax avoidance?

Question 57: Are there any existing powers targeted at promoters which could be strengthened with the addition of new criminal offences for non-compliance? Question 58: In what other situations would criminal sanctions be appropriate for undeterred promoters?

Question 59: What in your view are the type of sanctions that would deliver the aim of significantly disrupting the lifestyles of controlling minds?

Question 60: What further changes could be made to DOTAS to capture a wider range of tax avoidance?

Question 61: How can HMRC ensure that it obtains information from third parties in a timely fashion?

Question 62: How best do you think HMRC can use advances in technology including AI to aid its work tackling marketed tax avoidance?

10. The consultation process

This consultation is being conducted in line with the Tax Consultation Framework. There are 5 stages to tax policy development:

Stage 1: Setting out objectives and identifying options.

Stage 2: Determining the best option and developing a framework for implementation including detailed policy design.

Stage 3: Drafting legislation to effect the proposed change.

Stage 4: Implementing and monitoring the change.

Stage 5: Reviewing and evaluating the change.

This consultation is taking place during stage 2 of the process. The purpose of the consultation is to seek views on the detailed policy design and a framework for implementation of a specific proposal, rather than to seek views on alternative proposals.

How to respond

A summary of the questions in this consultation is included at chapter 9.

Responses should be sent by 18 June, by email to ca.consultation@hmrc.gov.uk.

Please note that the mailbox will not accept emails larger than 10MB.

Please do not send consultation responses to the Consultation Coordinator.

Paper copies of this document in Welsh and alternative formats (large print, audio, or Braille) may be obtained free of charge from the above address.

When responding please say if you are a business, individual or representative body. In the case of representative bodies please provide information on the number and nature of people you represent.

Confidentiality

HMRC is committed to protecting the privacy and security of your personal information. This privacy notice describes how we collect and use personal information about you in accordance with data protection law, including the UK GDPR and the Data Protection Act (DPA) 2018.

Information provided in response to this consultation, including personal information, may be published or disclosed in accordance with the access to information regimes. These are primarily the Freedom of Information Act 2000 (FOIA), the DPA 2018, UK GDPR and the Environmental Information Regulations 2004.

If you want the information that you provide to be treated as confidential, please be aware that, under the Freedom of Information Act 2000, there is a statutory Code of Practice with which public authorities must comply and which deals with, amongst other things, obligations of confidence. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on HM Revenue and Customs.

Consultation Privacy Notice

This notice sets out how we will use your personal data, and your rights. It is made under Articles 13 and/or 14 of the UK GDPR.

Your data

We will process the following personal data:

Name
Email address
Postal address
Phone number
Job title

Purpose

The purposes for which we are processing your personal data is: Closing in on the promoters of marketed tax avoidance.

Legal basis of processing

The legal basis for processing your personal data is that the processing is necessary for the exercise of a function of a government department.

Recipients

Your personal data will be shared by us with HM Treasury.

Retention

Your personal data will be kept by us for 6 years and will then be deleted.

Your rights

You have the right to request information about how your personal data are processed, and to request a copy of that personal data.

You have the right to request that any inaccuracies in your personal data are rectified without delay.

You have the right to request that any incomplete personal data are completed, including by means of a supplementary statement.

You have the right to request that your personal data are erased if there is no longer a justification for them to be processed.

You have the right in certain circumstances (for example, where accuracy is contested) to request that the processing of your personal data is restricted.

Complaints

If you consider that your personal data has been misused or mishandled, you may make a complaint to the Information Commissioner, who is an independent regulator. The Information Commissioner can be contacted at:

Information Commissioner’s Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF

0303 123 1113 casework@ico.org.uk

Any complaint to the Information Commissioner is without prejudice to your right to seek redress through the courts.

Contact details

The data controller for your personal data is HMRC. The contact details for the data controller are:

HMRC
100 Parliament Street
Westminster
London
SW1A 2BQ

The contact details for HMRC’s Data Protection Officer are:

The Data Protection Officer
HMRC
14 Westfield Avenue
Stratford
London
E20 1HZ

advice.dpa@hmrc.gov.uk

Consultation principles

This call for evidence is being run in accordance with the government’s Consultation Principles.

The Consultation Principles are available on the Cabinet Office website.

If you have any comments or complaints about the consultation process, please contact the Consultation Coordinator.

Please do not send responses to the consultation to this link.