Although the 'Legislation Day' draft clauses published on 18 July 2023 included few surprises, one point of interest was the UK government's decision to press ahead with the proposed new powers for HMRC to deal with promoters of tax avoidance schemes.
These are two measures which introduce (a) a new power for HMRC to apply for a disqualification order against directors of companies which promote tax avoidance, and (b) a new criminal offence of failing to comply with a stop notice issued under the promoters of tax avoidance schemes rules.
HMRC's recent consultation on the proposals elicited a robust response from the CIOT, particularly on the new criminal offence. As the draft legislation makes clear, this will be a strict liability criminal offence which is committed by an individual who fails to comply with a stop notice, regardless of their intent. The aim of the legislation is to enable HMRC to use its criminal investigation powers where it has established that promotion of a scheme in breach of a stop notice has occurred and provide the 'strongest possible deterrent' to ensure promoters comply and stop promoting their arrangements. Conviction of the offence could result in a fine with no cap, and up to a two-year prison term.
The CIOT had raised concerns around this power potentially putting HMRC officials in the position of deciding what is or is not a criminal act; HMRC decides whether or not to issue a stop notice, and that decision could potentially be used incorrectly. As the CIOT noted, simply relying on HMRC's goodwill 'is not a sufficient safeguard'.
No additional safeguards above those set out in FA 2014 in relation to stop notices have been published, but the draft legislation does introduce an exception for reasonable excuse (making clear that the usual limitations on what is a reasonable excuse apply: insufficiency of funds, relying on any other person to do anything, or relying on legal advice that is judged not to be reasonable).
Although the 'Legislation Day' draft clauses published on 18 July 2023 included few surprises, one point of interest was the UK government's decision to press ahead with the proposed new powers for HMRC to deal with promoters of tax avoidance schemes.
These are two measures which introduce (a) a new power for HMRC to apply for a disqualification order against directors of companies which promote tax avoidance, and (b) a new criminal offence of failing to comply with a stop notice issued under the promoters of tax avoidance schemes rules.
HMRC's recent consultation on the proposals elicited a robust response from the CIOT, particularly on the new criminal offence. As the draft legislation makes clear, this will be a strict liability criminal offence which is committed by an individual who fails to comply with a stop notice, regardless of their intent. The aim of the legislation is to enable HMRC to use its criminal investigation powers where it has established that promotion of a scheme in breach of a stop notice has occurred and provide the 'strongest possible deterrent' to ensure promoters comply and stop promoting their arrangements. Conviction of the offence could result in a fine with no cap, and up to a two-year prison term.
The CIOT had raised concerns around this power potentially putting HMRC officials in the position of deciding what is or is not a criminal act; HMRC decides whether or not to issue a stop notice, and that decision could potentially be used incorrectly. As the CIOT noted, simply relying on HMRC's goodwill 'is not a sufficient safeguard'.
No additional safeguards above those set out in FA 2014 in relation to stop notices have been published, but the draft legislation does introduce an exception for reasonable excuse (making clear that the usual limitations on what is a reasonable excuse apply: insufficiency of funds, relying on any other person to do anything, or relying on legal advice that is judged not to be reasonable).
