The government is to consult on plans designed to reduce the economic incentives behind some types of aggressive tax planning, by enabling HMRC to ask for upfront payment from taxpayers using avoidance schemes that are the same as or similar to one that has been defeated in the courts.
The proposals to require individuals and companies to pay the tax in dispute during an enquiry or appeal relating to tax avoidance were first outlined in Autumn Statement 2013 and are now the subject of a consultation,
Under the proposals the accelerated payments measure will be linked to the issue of a 'follower notice' informing taxpayers that their case is on the same or substantially the same grounds as a case already decided in the tribunal or court.
HMRC is also consulting on proposals to include any disputed tax associated with schemes that are subject to the Disclosure of Tax Avoidance Schemes (DOTAS) regime, as well as taxpayers who are being investigated under the new General Anti-Abuse Rule (GAAR).
HMRC says the aim is to remove the tactic that some taxpayers currently use of holding onto the disputed tax - sometimes for years - while their case is being investigated and taken through the courts, stating that it wins 80% of the avoidance cases it litigates.
The department says the proposed changes will help HMRC in resolving around 65,000 cases it is currently investigating, and act as a deterrent to anyone tempted to exploit the cashflow advantage allowed by the current rules. Taxpayers will still be free to continue to make their case to the tribunal or court and, if successful, their money will be returned with interest.
David Gauke, Exchequer Secretary to the Treasury said: 'The consultation we are publishing today will not only seek to remove the advantage that tax avoidance schemes users have; it will send a clear message to anyone thinking of using these schemes to avoid paying the tax that is due - tax avoidance doesn't pay.'
HMRC has also published a document with the responses to an earlier consultation, Raising the stakes on tax avoidance which gives details of plans to tackle the promotors of aggressive tax avoidance schemes. These include sending a conduct notice to a promoter who meets one or more of eleven threshold conditions, such as breaching the banking code of practice or promoting schemes which the GAAR Advisory Panel have determined fail the double reasonableness test.
The conduct notice will set out various conditions that the promoter will have to comply with and the person concerned will be given an opportunity to comment on the proposed terms of the notice.
If there is a breach of the conditions of the conduct notice, for instance in terms of the provision of information to customers or intermediaries or information to HMRC, this may lead to a monitoring notice being issued by HMRC. A monitored promoter will be subject to specific information powers and could be liable for penalties for non-compliance with a maximum penalty of £1m.
HMRC will have power to name the monitored promoters and require the promoter to inform its intermediaries and clients that it is being monitored. The naming will also include information as to why the conduct notice was breached. Higher than normal standards will apply to monitored promoters if they claim as their defence that they have a reasonable excuse or that they exercised reasonable care.
The consultation runs until 24 February 2014 and details are HERE
