The legislation gives HMRC the power to tackle all aspects of the marketed avoidance supply chains, and is designed to deter a person from enabling abusive tax arrangements.

An enabler is any person who is responsible, to any extent, for the design, marketing or otherwise facilitating another person to enter into abusive tax arrangements.

When such arrangements are defeated in court or at the tribunal, or are otherwise counteracted, each person who enabled those arrangements may be liable to a penalty.

An enabler may fall into one or several of five categories: a designer of arrangements; a manager; someone who marketed the arrangements; an enabling participant; or a financial enabler in relation to the arrangements.

A person just needs to meet one of the five descriptions in relation to any of the actions or activities they have undertaken to be in scope for a penalty under the enablers legislation.

A key requirement of each of the descriptions of enabler activities, other than an enabling participant, is that for a person to be an enabler, the activity must be performed in the course of a business carried on by that person.

This means that an employee of a business is excluded from being an enabler in relation to activities that have been performed, as they have been performed as part of that employment, and not in the course of a business carried on by them.

The enabler would be the employing business in this case as the employee is acting on behalf of the employer, who is the person carrying on the business and benefits from the income generated.

In the case of a partnership which is the person (or body of persons) carrying on the business, it is the partnership that will be the enabler.

HMRC’s guidance provides a number of examples of definitions used in the legislation in areas such as ‘relevant advice’.

As regards the ‘knowledge condition’, HMRC says this applies if the person providing the advice knew, or could reasonably be expected to have known, that the advice would be, or was likely to be, used in the design of abusive tax arrangements or a proposal for abusive arrangements.

This will be a question of fact and will take into consideration such things as the adviser’s existing tax and professional knowledge at the time the advice was provided.

As an example, if a company that decides to implement a tax concludes that the proposed arrangements simply would not work and abandons the idea, neither decision would impact on the question of whether the audit firm is an enabler.

If, however, the audit firm went beyond this and provided advice to the extent that changing certain aspects of the overall arrangements would enable the company to secure a specific accounting treatment, while also not changing the overall efficacy of what they appear to be trying to achieve, the audit firm could bring itself within scope for a penalty as a designer.

The guidance states that a person is a manager of arrangements if, in the course of a business carried on by them, they’re to any extent responsible for the organisation or management of those arrangements, and at that time knew or could reasonably be expected to have known that the arrangements were abusive tax arrangements.

In the example where a client has entered into tax arrangements that may be abusive but where the client’s tax adviser has taken no part in helping their client implement or enter into the arrangements, and the adviser’s first involvement with the arrangements is in relation to the completion of the client’s self assessment tax return, the agent would not be seen as an enabler.

The guidance also covers the interaction between the enablers legislation and the accountancy bodies’ professional conduct in relation to taxation (PCRT) code, as well as legally privileged communications with lawyers. It gives examples of other definitions within the legislation, including marketing schemes, dealing with declarations by taxpayers wishing to leave schemes, and the nature of the financial products involved.

Tax avoidance: enablers - who is classed an enabler is here: https://www.gov.uk/guidance/tax-avoidance-enablers-who-is-classed-an-ena...

Tax avoidance: enablers of defeated tax avoidance legislation is here.

Report by Pat Sweet