Commentary

A4.573A Penalties for enablers of defeated tax avoidance

Administration and compliance

A4.573A Penalties for enablers of defeated tax avoidance

A4.573A Penalties for enablers of defeated tax avoidance

Background

Historically, 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 Budget 2016, 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, launched a consultation in 2016. Subsequent legislation introduced in F(No 2)A 2017 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 activities1.

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'2.

Furthermore, HMRC stated in December 2016 when the draft legislation was originally published, that advisers acting within the Professional Conduct in Relation to Taxation (PCRT) would not normally be subject to the enabler provisions3. The PCRT code, which members of the seven leading tax and accounting professional bodies must abide by, can be found on the websites of the various professional bodies. For example, see the ICAEW website.

For more detail of HMRC's view of the interaction between the penalties for enablers of defeated tax avoidance regime and PCRT,

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