Two proposals in the draft Finance Bill 2023-24 aimed at tackling “the most persistent and determined promoters of tax avoidance” have been welcomed by TaxWatch.
The criminalisation of those who fail to comply with a Stop Notice under the POTAS (promoters of tax avoidance schemes) regime should deter many of those who presently continue to market or administer schemes in the face of civil penalties, provided it is publicised and enforced at scale and speed.
The second proposal is for a new strict liability offence, which would be committed by the recipient of a Stop Notice, and any others associated with it, if they continue to promote or manage schemes – regardless of their intent. Moreover, the perpetrator would be criminalised even if the courts subsequently find the scheme covered by the Stop Notice delivered the actual tax advantage promised by the promoter.
TaxWatch’s concern is not that the criminalisation of Stop Notices will encourage promoters to move overseas, rather that it won’t deter them any time soon, given that only 12 Stop Notices have been published to date.
TaxWatch also welcomes giving HMRC the ability to seek a disqualification order for directors (or others) who control or exercise influence over a company involved in promoting tax avoidance and operating against the public interest, including those that HMRC have helped wind-up. However, the identification of such people will be relatively difficult and HMRC will need to improve the use of its powers. For example, it had not obtained a single winding-up order against any company, almost a year after that power had been introduced.
If the draft version of the bill is made law, HMRC will also be able seek disqualification orders against those who had breached the new criminal offence relating to Stop Notices.
Finally, if some promoters do move overseas as a consequence of this legislation, HMRC should press for extradition and use all their powers against those who provide a UK-based front for their criminal activities.
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