Clampdown on promoters of VAT avoidance schemes

The draft Finance Bill 2017 has confirmed plans to widen the scope of the disclosure of tax avoidance schemes (DOTAS) to include all indirect taxes including VAT, from 1 September 2017, with penalties of up to £10,000 for non-compliance

The legislation, Disclosure of Avoidance, requires a person to disclose any scheme to HMRC which:

  • is entered into by that person on or after 1 September 2017;
  • constitutes notifiable arrangements under DOTAS; and
  • implements proposals which are notifiable proposals under DOTAS.

Notifiable arrangements are those which enable any person to obtain a tax advantage in relation to VAT or any other indirect tax. The legislation states: ‘where HMRC has grounds for suspicion that arrangements or proposals are notifiable, they may apply to the Tribunal for an order'.

A promoter of a VAT avoidance scheme is any person who is responsible for the design of the scheme, not just the person primarily responsible for the design. It is also anyone who makes a ‘firm approach’ to another person with the object of making them join a scheme, or making them implement the scheme to another person.

HMRC can apply for an order to determine what information should be disclosed and provided to HMRC, this information must be provided within 31 days.

Where there is more than one promoter involved, only one person is required to disclose the relevant information to HMRC.

Failure to meet the requirements by the promoter, client or anyone involved within the avoidance scheme means that an initial penalty of up to £600 per day will be charged, which could increase to up to £5,000 per day. A penalty may be charged for up to £7,500 if a disclosure is failed to be made within 36 months and will increase to £10,000 thereafter.

The Indirect Taxes (Notifiable Arrangements) Regulations 2017 is available here

 

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