V5.360G Sanctions for serial tax avoidance
FA 2016 s 159 and Schedule 18 introduce a regime to combat the persistent and repeated use of tax avoidance schemes which are defeated by HMRC. The regime, which comes into force as described in “Commencement” below, may be summarised as follows—
(1) Following the defeat of a tax avoidance scheme, HMRC issue the taxpayer a warning notice, which lasts initially for five years.
(2) During the warning notice period, the taxpayer must report on a yearly basis to HMRC regarding its activities (and particularly any tax avoidance activities) in that year.
(3) If a further tax avoidance scheme used by the taxpayer in the warning notice period is defeated by HMRC, a penalty will be imposed. Further penalties, on an escalating scale, will apply to any further defeats in the warning period.
(4) If the taxpayer incurs three defeats in a warning period, HMRC may publish details of the taxpayer.
The regime applies to both VAT and direct taxes1; the description below only applies to those provisions which relate to VAT.
Issue of warning notice
Where a person incurs a “relevant defeat” in relation to any “arrangements”, HMRC must, within 90 days of the day on which the defeat is incurred, give the person2 a warning notice setting out3—
(a) when the warning period begins and ends;
(b) the relevant defeat to which the notice relates; and
(c) the implications of the issue of the notice.
“Arrangements” includes any agreement,
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