Disclosure of Tax Avoidance Schemes Regime Changes

  • The disclosure of tax avoidance schemes (DOTAS) regime is amended to:
  • ensure disclosure is made by persons resident in the UK where a promoter not resident in the UK fails to disclose;
  • change the information that must be provided to HMRC;
  • enable HMRC to publish information about promoters and disclosed schemes; and
  • establish a taskforce to enforce the strengthened regime.

Changes to primary legislation included in the Finance Bill come into force on the date of Royal Assent, and further amendments will be made through secondary legislation and will come into force at a later date. The changes will be extended to schemes avoiding National Insurance contributions.

Promoters of Tax Avoidance Schemes

The following changes will be made in a future Finance Bill to the legislation that affects high-risk promoters of avoidance schemes:

  • HMRC will be able to issue conduct notices to a broader range of connected persons;
  • the time limit for issuing notices to promoters who have failed to disclose avoidance schemes to HMRC under DOTAS is amended;
  • a new threshold condition will be introduced for failing to comply with NICs disclosure requirements; and
  • the threshold conditions will take account of decisions by independent bodies in matters relating to professional misconduct.

Serial Avoiders

Legislation will be included in a future Finance Bill to introduce tougher measures for those who persistently enter into tax avoidance schemes which fail. These will include a special reporting requirement and a surcharge on any such serial avoider whose latest tax return is inaccurate as a result of a further failed scheme. The Government will look to restrict access to reliefs for serial avoiders and to name and shame them. Legislation will be introduced in due course to widen the scope of the current disclosure regime by including promoters whose schemes regularly fail.

GAAR Penalties

Legislation will be introduced in a future Finance Bill that will increase the deterrent effect of the General Anti-Abuse Rule (GAAR), by introducing a specific, tax-geared penalty that applies to cases tackled by the GAAR.

Penalties for Offshore Non-compliance

The penalty for failure to notify chargeability to income tax or capital gains tax, the late filing penalty for self-assessment tax returns and the penalty for careless or deliberate errors in documents is currently in each case increased where the failure involves an offshore matter. This offshore penalty regime is to be strengthened and extended with effect from 1 April 2016 so that it will:

  • apply additionally to inheritance tax;
  • cover cases where the proceeds of domestic non-compliance are situated or held outside the UK; and
  • have four (increased from three) levels of penalty, with the lowest level applying to countries that adopt automatic exchange of information.

On and after the date of Royal Assent to Finance Act 2015 there will be a new and additional penalty where:

  • a person is liable to one of the penalties mentioned above;
  • that penalty is for a deliberate failure;
  • assets are moved from a specified country to a non-specified country; and
  • a main purpose of the movement is to prevent or delay the discovery by HMRC of the potential loss of revenue giving rise to the said penalty.

Countries will be specified for this purpose if they have committed to exchanging information.

Disclosure Facilities

The following have been announced in relation to current disclosure facilities:

  • the disclosure period of the Liechtenstein Disclosure Facility will be shortened, with the end date being changed from April 2016 to December 2015; and
  • the disclosure period of the Crown Dependencies Disclosure Facility will also be shortened, with the end date being changed from September 2016 to December 2015.

A new time-limited disclosure facility will be introduced that will run after the existing facilities close, with tougher terms than existing facilities, including penalties of at least 30% and no guarantee around criminal investigation.