ESM10003B - off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2021): basic principles: Targeted Anti-Avoidance Rule (TAAR)

Sections 61WA Chapter 10, Part 2 ITEPA 2003

The off-payroll working rules include a TAAR to address situations where parties enter into arrangements to avoid any of the conditions at section 61O ITEPA 2003 or section 61P ITEPA 2003 from applying. The TAAR has both a tax and NICs equivalent. The TAAR is intended to discourage avoidance behaviour.

The TAAR would apply when at least one relevant person participates in a relevant avoidance arrangement to secure a tax advantage. A relevant avoidance arrangement is any arrangements where the main purpose, or one of their main purposes, is to secure a tax advantage by ensuring that at least one of the conditions in section 61O ITEPA 2003 or section 61P ITEPA 2003 is not met.

‘Relevant person’ means either:

  • the worker
  • a person who is resident in the UK, or
  • a person who has a place of business in the UK.

‘Tax advantage’ includes:

  • avoidance or reduction to the charge or assessment of tax or NICs
  • repayment or increased repayment of tax or NICs
  • avoidance of a possible assessment of tax or NICs, and
  • deferral of the payment of tax or NICs, or advancement of the repayment of tax or NICs.

‘Arrangements’ include any:

  • agreement
  • understanding
  • scheme
  • transaction, or
  • series of transactions.

Where the TAAR is triggered, HMRC will consider the relevant avoidance arrangement to identify the person who entered into the arrangement as that person will be liable for the tax. If more than one person has entered into the arrangement, HMRC will identify the highest person in the chain that is involved in that arrangement and from whom HMRC considers there is a realistic prospect of recovering the tax and NICs that would be due within a reasonable period of time as that person will be liable.

HMRC will identify the next highest person in the chain that is involved in the avoidance arrangement and continue to look down the chain, ending at the lowest person in the chain that is involved in the avoidance, where there is no realistic prospect of recovering the tax and NICs that would be due within a reasonable period of time (for example, if the highest person has already liquidated before HMRC can recover any liability). In some circumstances, this may mean the intermediary or the worker becomes liable.

Governance

Where HMRC is considering applying the TAAR, the case will go through an internal governance panel. This panel will consist of representatives from across the department and will be responsible for reviewing the case before a decision is made to issue assessments or settle.

Where a case is within the remit of one of HMRC’s dispute resolution boards (DRBs), a referral will be made to the DRB for a decision in relation to the final resolution proposal. This is likely to only be required in exceptional cases.

Right to appeal

Where a party is assessed for the income tax and NICs under the TAAR, they will have the right to appeal against the assessment to either HMRC or directly to the Tribunal and will be able to set out why they disagree with the assessment, as they would for any other income tax or NICs assessment.