Working Together. Talking Points

Transcription

1 Working Together Talking Points

2 Today s session: The new serial tax avoidance regime 16 November 2016

3 Contents Overview of the new serial tax avoidance regime What does the new regime mean for agents and their clients? Other information Key contacts Q & A

4 How does serial tax avoidance legislation work? Finance Act 2016 introduced the new serial tax avoidance regime The new regime is not just aimed at frequent or serial avoiders The regime is designed to deter people from using avoidance schemes

5 Key features of serial tax avoidance The regime consists of warnings and escalating sanctions The warnings will apply to schemes defeated after 5 April 2017, whenever entered into or entered into and defeated, on or after 15 September 2016 The new sanctions - will apply to defeated schemes entered into on or after 15 September 2016 and used during a warning period

6 Schemes or arrangements included in the serial tax avoiders legislation Arrangements disclosed or disclosable under Disclosure of Tax Avoidance Scheme (DOTAS) legislation or the VAT Avoidance Disclosure Regime (VADR) Tax arrangements for which HMRC has given a follower notice to the taxpayer Tax arrangements where we ve given a notice of final decision to the taxpayer, to counteract under the general anti abuse rule (GAAR)

7 When is a tax avoidance scheme defeated? A tax avoidance scheme is defeated when the counteraction becomes final The counteraction could result in HMRC: requiring adjustments to be made to tax returns or claims making adjustments to tax returns or claims giving one or more tax assessments, decision notices or determinations for the additional tax liability

8 What happens when a scheme is defeated? If HMRC defeats a scheme under the new regime, a warning notice will be issued The warning notice will remain in place for a period of 5 years, and will be extended following further defeats during the warning period During the warning period the recipients will be required to send details about: - any avoidance scheme used that year, and which is disclosed under DOTAS or VADR - why they think the scheme(s) achieve the intended tax advantage - how much tax would be payable had the scheme not been used

9 Consequences of using further schemes after a taxpayer has entered their first warning period A new warning notice That notice will extend the existing warning period by up to 5 years If HMRC defeats a tax avoidance scheme after a warning period has ended, we ll issue a new notice, which will start a new 5-year warning period

10 Consequences of using further schemes during a warning period - New sanctions A penalty of initially 20% of the understated tax, rising to a maximum of 60% for further defeats of schemes Being named as a serial avoider after the third defeat Access to direct tax reliefs denied after 3 defeated schemes which misuse reliefs

11 The benefits of disclosing full information early Those who want to settle their tax affairs should take action as soon as possible and certainly before 6 April 2017 Your clients can avoid both the reporting requirements and the tougher sanctions by settling or disclosing information about their schemes early and not engaging in future avoidance Defeats of schemes entered into before 15 September 2016 won't count for the serial tax avoidance legislation if before 6 April 2017 the scheme user either: settles their existing avoidance arrangements by working with HMRC to resolve their tax position provides HMRC with full information about their existing avoidance arrangements or agrees to provide HMRC with full information about their existing avoidance arrangements and does so within the time set by HMRC

12 The benefits of disclosing full information early case study Paul and Iram have both been using an avoidance scheme since April 2015 that has been disclosed under DOTAS, but haven t agreed with HMRC on the amount of tax due.

13 The benefits of disclosing full information early case study Before 6 April 2017 Iram agrees to fully disclose information about her use of the avoidance scheme and agrees with HMRC a timeframe for providing this. She doesn t provide the information until 30 June and the scheme is settled on 30 September However, because Iram agreed to fully disclose before 6 April 2017, and does so within the agreed timeframe, she doesn t receive a warning notice.

14 The benefits of disclosing full information early case study Paul doesn t want to fully disclose or to settle now, but on 30 June 2017 he agrees the tax due with HMRC. Because Paul did not agree before 6 April 2017 to fully disclose or agree to fully disclose information about his scheme, Paul receives a warning letter from HMRC within 90 days of settling. This means he has to tell HMRC each year for the next 5 years about his use of schemes, which are disclosable under DOTAS or disclosed or disclosable under VADR, and let HMRC have the details. If Paul uses any more such schemes he is likely to receive a significant penalty.

15 Key contacts Call:

16 More information If you would like more information on the serial tax avoidance regime, refer to: You may also be interested in reading about the schemes currently in the Spotlight here.

17 Thank you for joining us