Tagged as a clampdown on enablers, the move follows the announcement at Budget 2016 that the government would be exploring further options to influence the behaviour of promoters and other intermediaries, including agents, Independent Financial Advisers (IFAs) and others in the supply chain.

Fines could be imposed on accountants who promote the schemes at 100% of the value of the unpaid tax as a result of using an aggressive, overt tax avoidance scheme, which is viewed is beyond acceptable tax planning by the government and HMRC.

The timing for the introduction of the new penalty scheme has not been set out although full details will be released at Budget 2017 next March, with a view to introducing the rules into legislation an upcoming Finance Bill. There are no estimates of the potential increase in revenue for the Exchequer with no estimates of the impact available although the consultation includes a draft impying that the scheme could take effect over the course of the 2017-18 tax year.

Jane Ellison, financial secretary to the Treasury, said: ‘Those who seek an unfair advantage, or who provide the services that enable it, and who then frustrate HMRC's efforts to identify, investigate and resolve these cases, should bear real risks and costs for their choices. This consultation sets out plans and proposals to bear down on this shrinking but persistent minority.’

The consultation makes clear that an ‘enabler’ of tax avoidance includes anyone in the supply chain who benefits from an end user implementing tax avoidance arrangements and without whom the arrangements as designed could not be implemented.

However, it says that a tax agent who does no more than prepare a client’s tax return for submission to HMRC would not be classed as such, as the focus on those who benefit financially from enabling others to implement tax avoidance arrangements. The consultation document provides a number of case studies to illustrate who would be caught by the proposed new arrangements.

HMRC is proposing that determining whether or not someone is an ‘enabler’ should be defined based on the broad criteria currently used for the offshore evasion measure but specifically tailored to the avoidance supply chain. This includes acting as a middle-man, providing planning and bespoke advice, maintaining the necessary infrastructure for a scheme, providing financial assistance and non-reporting.

Similarly, HMRC intends to adopt a penalty regime for those deemed to be enablers which is broadly the same as that relating to offshore evasion, with the added ability to name enablers in order to deter taxpayers from using their schemes.

However, unlike the offshore approach, HMRC says it proposes to use the defeat of the tax avoidance arrangements as the trigger for enabler penalties. This would mean that each enabler of that avoidance arrangement would be subject to penalties in their own right, irrespective of the final penalty position of the user of the arrangements.

An ‘enabler’ of tax avoidance includes anyone in the supply chain who benefits from an end user implementing tax avoidance arrangements

The size of any penalty is open to discussion, with HMRC suggesting it could amount to 100% of the financial benefit an enabler enjoyed in providing their services, or alternatively could be based on 100% of the total tax scheme users have mitigated as a result of using a particular scheme. HMRC says the amounts involved could be significant, so there might be a cap.

In addition, HMRC plans to use rules similar to those adopted in Disclosure of Tax Avoidance Schemes (DOTAS) legislation to exclude from penalty those agents and accountants who have unwittingly enabled tax avoidance activity.

The consultation states: ‘For example, an agent who provides general accounting and taxation services may submit a return for a client, which is later found to be incorrect as a result of avoidance arrangements being defeated.

‘If the agent could show that they had advised their client not to implement the arrangements, or that their client had not discussed the issue with them before implementing the arrangements, we would not want a penalty as long as they could also show that all appropriate disclosures were made when that return was submitted.’

The consultation is also concerned with plans to strengthen the penalties for submitting an inaccurate tax return, as a result of participating in a tax avoidance scheme. HMRC argues that many taxpayers using such schemes claim they took ‘reasonable care’ when doing so, as they consulted professional advisers before signing up, and were often also supplied with legal opinion from QCs on the nature of the scheme.

HMRC says does not consider that advice given to the promoter about the principles and intended structure of the arrangements, rather than independent assurance of a person’s specific tax position having used those arrangements, demonstrates the taking of reasonable care by the person whose tax return contains inaccuracies.

To reinforce this view, HMRC is proposing new legislation which would state that avoiders could not cite generic advice in an attempt to demonstrate that they had taken reasonable care and should not therefore be subject to a careless behaviour penalty for the inaccuracy in their tax return. HMRC is also considering placing the burden on the taxpayer to show that they have in fact taken reasonable care, rather than HMRC having to elicit information to demonstrate that they have failed to take reasonable care.

A  ‘defeated’ scheme would be determined using the definition in Finance Bill 2016, that is  where there is a final determination of a tribunal or court that the arrangements do not achieve their purported tax advantage, or, in the absence of such a decision there is agreement between the taxpayer and HMRC that the arrangements do not work.

Finally, the consultation includes a number of potential interventions which HMRC is considering in order to influence the behaviours of those involved in tax avoidance schemes. These include requiring promotors to provide a list of those to whom arrangements are being marketed, so HMRC can provide updates to potential users, and rebadging the DOTAS Scheme Reference Number as an ‘Avoidance Enquiry Reference’, along with the facility for HMRC to provide real-time interventions to highlight to users that a scheme is under investigation.

HMRC is also considering introducing a new, escalating surcharge for frustrating an enquiry by withholding or delaying responses to information requests seeking to establish potential avoidance.

The deadline for comments is 12 October. Details of Strengthening Tax Avoidance Sanctions and Deterrents: A discussion document are here.