A4.573A Enablers of defeated tax avoidance—penalty
Although tax avoiders face significant financial costs when HMRC defeats them in court, those who advised on, or facilitated, the avoidance bore little risk. In the 2016 Budget, the Government announced its intention to explore options to discourage all those in the supply chain of tax avoidance arrangements, so that they also bore some risk, and a consultation ran from 17 August 2016 and to 12 October 2016. Subsequent legislation1 introduced a penalty regime which targets 'enablers' of defeated avoidance schemes.
The stated aim of the legislation is to influence and promote behavioural change in those agents, intermediaries and others who design, market or facilitate the use of abusive tax arrangements, by ensuring that they can be held accountable for their activities. HMRC has said that the vast majority of professionals who provide clients with advice on genuine commercial arrangements will not be impacted, as arrangements will only be treated as abusive if they meet a 'double reasonableness test'.
Furthermore, HMRC stated in December 2016 when the draft legislation was originally published, that advisers acting within the updated Professional Conduct in Relation to Taxation (PCRT) would not normally be subject to the enabler provisions2.
The penalty applies to any person who enables another person to enter into abusive tax arrangements which have later been defeated. It applies to enablers from 16 November 2017 in relation to steps taken by them after that date. External scrutiny is provided by the GAAR Advisory Panel, and any penalty HMRC