Disclosure of tax avoidance schemes (DOTAS) ― overview

Introduction

Over many years, successive Governments have introduced measures to curb what they have seen as being unacceptable tax avoidance. This is different to tax evasion, where sums or sources of income or gains are concealed or omitted from a taxpayer’s returns. Avoidance is where thetaxpayer uses theway in which tax law, or a combination of tax laws, works to achieve a tax advantage, such as minimising or delaying tax bills (or maximising or accelerating a tax repayment), otherwise than where thelegislation in question was introduced with theaim of delivering that tax advantage.

In addition to theinclusion of numerous specific anti-avoidance provisions designed to stop identified avoidance schemes, theUK tax code includes several wider anti-avoidance tools:

1. •

   the regime for disclosure of tax avoidance schemes (DOTAS) ― aimed at providing HMRC with early intelligence about avoidance

2. •

   the general anti-abuse rule (GAAR) ― aimed at counteracting any tax advantage delivered by avoidance not caught by more specific measures (see theGeneral anti-abuse rule (UK GAAR) guidance note)

3. •

   accelerated tax payments ― this can be used to require thetaxpayer to pay thedisputed tax or national insurance up-front, so that thecash flow advantage during theenquiry/litigation rests with HMRC (see below)

4. •

   the regime for promoters of tax avoidance schemes (POTAS) ― aimed at changing thebehaviour of agents who offer high-risk avoidance schemes to their clients (see Simon’s Taxes A7.301)

5. •

   the regime for serial tax avoiders ― aimed at punishing taxpayers who repeatedly use tax avoidance schemes that are defeated by HMRC and so discouraging those taxpayers from doing so (see Simon’s Taxes A7.330)

Scottish devolved taxes are subject to a general anti-avoidance rule, see theScottish general anti-avoidance rule (Scottish GAAR) guidance note.

Scope of DOTAS regime

This guidance note focuses on theDOTAS regime, which was first introduced in FA 2004 and has been repeatedly amended since that time. Under theDOTAS regime, persons have to