A7.335 Serial tax avoidance—penalties
A person who during a period of warning uses arrangements that are ultimately defeated will incur a penalty. The penalty is 20% of the amount of tax understated or overclaimed for the first defeat of a scheme used during a warning period, 40% for the second such defeat and 60% for any subsequent defeats1. If a person incurs more than one simultaneous relevant defeat in relation to different arrangements, the defeats are to be treated in order of the 'value of the counteracted advantage', with the lowest value being treated as incurred last. If a person is given a single warning notice in relation to more than one defeat, they are to be treated as having received a separate notice in relation to each2.
The 'value of the counteracted advantage' is the additional amount of tax due or payable as a result of the counteraction under the GAAR, or the follower notice or DOTAS provisions, and that counteraction is final. The amount 'due and payable' includes any amount payable to HMRC which has been repaid by them in error, and any amount which would have been repayable by HMRC but for the counteraction, but does not include group relief and relief3 in respect of repayment etc of a loan which is deferred4. Where the counteracted advantage results in a loss being
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