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HMRC rewrites guidance on disclosure of tax avoidance schemes

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HMRC has rewritten its guidance to the disclosure of tax avoidance schemes (DOTAS) regime.

The number of schemes reported has reduced in recent years, according to HMRC figures. However, Graham Aaronson’s report on the merits of a general anti-avoidance rule (GAAR) – now being considered by the government – concluded that ‘purposive interpretation [of tax legislation], specific anti-avoidance rules and DOTAS are not capable of dealing with some of the most egregious tax avoidance schemes’.

The Chartered Institute of Taxation told HMRC last month that, while it recognised the problems caused by ‘abusive schemes [and] over complex legislation’, it remained unconvinced that the UK needed a GAAR.

‘We think the great majority of schemes are in any event being defeated,’ the CIOT said, adding: ‘Most crucially, we worry that the GAAR will not meet the aims of the politicians and will disappoint public opinion. (It is very telling that Private Eye has recently recognised this.)’

Private Eye had noted in its 13 January issue that a general anti-abuse power would not touch ‘big-time offshore avoidance’ which was considered ‘mere planning’.


The stated objective of the disclosure rules is to provide HMRC with early information about tax arrangements, who has used such arrangements and how they work. ‘On its own the disclosure of a tax arrangement has no effect on the tax position of any person who uses it. However, a disclosed tax arrangement may be rendered ineffective by Parliament, possibly with retrospective effect,’ HMRC says.

Disclosure is required in relation to income tax, corporation tax and capital gains tax where an arrangement:

  • ‘will, or might be expected to, enable any person to obtain a tax advantage’;
  • that tax advantage ‘is, or might be expected to be, the main benefit or one of the main benefits of the arrangement’; and
  • the arrangement falls within any description or ‘hallmark’ set out in regulations.

The detailed rules vary for national insurance contributions, stamp duty land tax and inheritance tax. 

The new version of the guidance, which has 115 pages, has been written ‘to incorporate supplementary guidance published between November 2010 and April 2011 and to clarify areas where previous advice may have been unclear’. The main changes are outlined in paragraph 1.4 of the new version, which is available on the HMRC website.