The Government has revealed further details on a new penalty for enablers of defeated tax avoidance schemes.
Published in the draft Finance Bill 2017, the new penalty is for any individual – including company directors and tax advisors – who “enables the use of an abusive tax avoidance arrangement which are later defeated”.
The Bill describes an enabler as someone who satisfies one of the following tests:
- A designer of the arrangements;
- A manager of the arrangements;
- A person who marketed the arrangements;
- An enabling participant in the arrangements (broadly someone who was essential to the success of the arrangements); or
- A financial enabler in relation to the arrangements (broadly someone who provided a financial product that enabled the taxpayer to participate in the arrangements).
HM Revenue & Customs (HMRC) says a ‘defeated’ arrangement will normally result from an appeal, or where HMRC has raised an assessment.
The penalty charge is equal to the fee received by the enabler for their role in enabling the defeated tax avoidance arrangements.
Where a fee covers two or more transactions, it must be apportioned on a just and reasonable basis, the Bill says.
It adds that where arrangements are entered into by multiple users, a penalty can only be charged where more than 50 per cent of the arrangements have been defeated.
The Bill is expected to receive Royal Assent in July 2017, and become law shortly after.