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Serial avoiders face further clampdown

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HMRC is consulting until 12 March 2015 on new sanctions against serial users of tax avoidance schemes, including surcharges and a ‘special measures’ regime, and the introduction of specific penalties where the general anti-abuse rule (GAAR) applies.

‘Since 2010 we have made 42 changes to tax law, closing down loopholes and making strategic changes to deter and prevent tax avoidance,’ David Gauke, the finance secretary to the Treasury, wrote in the foreword to the condoc. ‘In particular, we introduced the GAAR for tax and national insurance contributions, which is an overarching means of counteracting abusive tax arrangements. In 2014, we significantly advanced our efforts to tackle avoidance through the introduction of powerful new measures: the accelerated payments and follower notices [and] the high risk promoters rules … Even with these measures, there remains a small but hardened core of tax avoiders who are determined to try to pay less tax at every opportunity.’

Gauke also said that while the consultation proposed additional sanctions to target ‘especially persistent’ users of tax avoidance schemes, ‘we also think the time is right to consider whether to increase the deterrent effect of the GAAR through the introduction of specific GAAR penalties.’

Along with a series of questions to respondents as to how deterrents would work, some of the proposals in the document include the introduction of a surcharge on the repeated or concurrent use of tax avoidance schemes and the public naming of serial tax avoiders, as well as other special measures.

In related news, HMRC has published the updated guidance on the general anti-abuse rule (GAAR), which applies to the main direct and stamp taxes from 17 July 2013 and NIC from 13 March 2014. The update provides clarification for transactions entered into on or after 30 January 2015 and reflects the enactment of FA 2013 and the NICs Act 2014. There has been no change in HMRC’s interpretation of the law since the previous version was published in April 2013.

Finally, HMRC is inviting comments until 11 May 2015 on broad proposals for changing the way tax penalties are charged. The aim is to allow for differentiation between deliberate non-compliance and occasional error. Options might include: non-financial sanctions as an alternative to financial penalties; a progressive system based on accumulation of penalty ‘points’; or basing penalties on the overall compliance position rather than on a tax-by-tax basis.

Anthony Thomas (LITRG) welcomed the discussion document, saying: ‘HMRC is right to be launching this debate on the penalties regime for taxpayers. While some penalties may target and deter deliberate defaulters, they also catch the vulnerable, making their interactions with the tax system even more difficult than they need to be. In the last year in particular, we have been drawing HMRC’s attention to cases in which the bluntness, inflexibility and disproportionate effect of their penalty regimes are plain to see.’.