Following the July consultation on 'Lifting the lid on tax avoidance', Finance Bill 2013 will contain two changes to the Disclosure of Tax Avoidance Schemes (DOTAS) reporting rules.
- The DOTAS rules will require clients who use schemes notified under DOTAS to provide the promoter with their National Insurance Number (NINo) and (if they have one) their Unique Taxpayer Reference (UTR). The client will be required to provide this information to the promoter from the later of 10 days after they receive the scheme reference number of the scheme, and the date they first enter into a transaction forming part of the scheme arrangements.
- Promoters need to report information on users of their schemes
quarterly to HMRC. They will be required to report the additional
NINo and UTR information. However HMRC has found that some entries
on the promoter client lists are intermediaries who might then
facilitate the use of the scheme for individuals who HMRC have no
immediate information on. Further information powers will therefore
be given to HMRC to request that the promoter provide prescribed
information in relation to any person other than the
'intermediary client' who the promoter might reasonably be
expected to know is or is likely to be a party to the arrangements,
to include:
- the name and address of any person to whom the intermediary may sell the scheme or who may obtain a tax advantage from the scheme;
- any relevant tax identification numbers (NINo and UTR); and
- sufficient information to enable HMRC to identify the manner in which the person is involved in the scheme.
It appears these measures will come into effect after the date of Royal Assent of Finance Act 2013, in line with the date for other proposed further tax avoidance developments.
Proposed further tax avoidance developments
In response to the July consultation HMRC has also indicated some changes in other areas.
Improving public information about tax avoidance
HMRC has committed to continue to raise awareness of failed avoidance schemes by publicising the outcome of litigation. It is also improving 'Spotlights' and doing more to communicate directly with the users of avoidance schemes. It will continue to work with those professional bodies who regulate members' conduct to ensure compliance with those rules. HMRC will share information with those bodies through existing gateways.
HMRC will also work with the relevant regulatory bodies to increase awareness of how the promotion of tax avoidance schemes is subject to the rules on financial products, consumer protection etc and the civil, and in some cases criminal, sanctions for failure to comply with those rules.
There will be consultation in 2013 on a package of penalty and information powers, specifically targeting the behaviour that is characteristic of a high-risk promoter.
Changes to DOTAS Hallmarks
There will be further consultation on the design of proposed changes to the DOTAS Hallmarks with a view to implementing the changes in 2013.
It is likely the two tests in Hallmark 1 will be aligned so that they apply where it might reasonably be expected that a promoter would wish to keep any element of the scheme (or the scheme itself) confidential from another promoter or HMRC. Consideration will also be given to refining Hallmark 1 further by adding that if confidentiality conditions are imposed where test 2 applies (confidentiality from HMRC), the scheme automatically comes within the Hallmark. Consideration will also be given to a separate Hallmark aimed at aggressive tax avoidance (one feature of which might be the establishment of a fighting fund), rather than incorporating these sorts of characteristics in existing Hallmarks 1 and 2.
There will be consideration given to refining proposals on amending the losses hallmark to ensure it does not catch ordinary businesses and start-ups. The proposal to add corporate tax losses within its scope will be refined to more closely target schemes that are intended to artificially use, sell or buy corporation tax losses.
A proposal to introduce a new Hallmark targeted at employment income received via third parties will be further refined to ensure it does not catch benign planning.
Further discussion will take place on appropriate filters to a new financial products Hallmark to ensure it is appropriately targeted.
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