The changes from 1 January 2018 and penalties for non-compliance.
For a number of years there have been rules governing the disclosure of tax avoidance schemes. HMRC requires information about the relevant scheme which assists them to:
get early information about schemes and how they claim to work
find out quickly who has used a scheme
Two issues that are worth reviewing are the changes in the categories of the schemes from 1 January 2018 and also the penalties surrounding non-disclosure/involvement with such schemes.
What has changed?
There are three different disclosure regimes:
VAT disclosure regime (VADR)
Disclosure of Tax Avoidance Schemes: VAT and other indirect taxes (DASVOIT)
Direct taxes and National Insurance contributions (DOTAS).
The changes relate to the first two categories. From 1 January 2018, DASVOIT came into force. The disclosure regime for VADR now applies to arrangements entered into before 1 January 2018.
DASVOIT applies to arrangements which are used on or after 1 January 2018. However, there is an exclusion from this for arrangements which were marketed or made available by a promoter, or where a promoter knew about arrangements being implemented, before 1 January 2018.
DASVOIT applies to the following taxes, levies and duties (so for most members the emphasis will be on VAT):
Insurance Premium Tax
General Betting Duty
Pool Betting Duty
Remote Gaming Duty
Machine Games Duty
Air Passenger Duty
Hydrocarbon Oils Duty
Tobacco Products Duty
duties on spirits, beer, wine, made-wine and cider
Soft Drinks Industry Levy
Climate Change Levy
Who is responsible for disclosure
The main duty to disclose under DASVOIT falls on the promoter of the arrangements. However there are circumstances where the person using the arrangements must disclose. They are:
if there’s a non-UK promoter who hasn’t disclosed
if a lawyer is unable to disclose due to legal professional privilege
if there is no promoter – for example, it’s an in-house scheme
There are penalties for failing to disclose any type of scheme and these apply to promoters, employers and users of avoidance schemes.
Just as importantly, there are also penalties for ‘enablers’ of schemes which are defeated. An ‘enabler’ is defined as:
any person who is responsible, to any extent, for the design, marketing or otherwise facilitating another person to enter into abusive tax arrangements
This may well include the client’s accountant if they are seen to be involved with or advise on a tax scheme. HMRC has issued full guidance on the application of penalties relating to defeated schemes which include examples of when /how various advisers become ‘enablers’ (see link below)