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Part 7 of the Finance Act 2004 requires taxpayers to provide HMRC with information about certain tax avoidance schemes. FA 2007, s 108 inserts new powers into Part 7 that will enable HMRC to:
- enquire into the reasons why a promoter has failed to disclose a scheme (new ss 313A and B);
- enforce disclosure in appropriate cases (new ss 306A and 314A); and
- call for more information where a disclosure is incomplete (new s 308A).
By being mostly exercisable through the Special Commissioners these provisions provide a mechanism for resolving disagreements as to whether a scheme is required to be disclosed.
Section 108 also amends TMA 1970, s 98C providing a power for the Treasury to make regulations that increase the level of daily penalty for failure to disclose a scheme where that failure continues after the Special Commissioners have made an order that it is disclosable.
Secondary legislation is also required to fully implement the changes described in this Revenue & Customs Brief:
- The Tax Avoidance Schemes (Information) (Amendment) Regulations 2007, which contain the time limits for complying with obligations arising from exercise of the new powers, were laid on 24 July. Subject to the annulment procedure, they come into force on 1 September, from when the new powers will be exercisable.
- Draft Tax Avoidance Schemes (Penalty) Regulations 2007 to increase the daily penalty to a maximum of £5,000 where the Special Commissioners have made an order under FA 2004, s 306A or s 314A, were presented to the House of Commons on 24 July. It is anticipated that these will be debated late October or early November. Subject to them being approved, they will come into effect 21 days later.
- It is anticipated that further information regulations will be made and laid on the day the penalty regulations are approved by Parliament, to come into effect at the same time as them. These further regulations will prescribe, in the case of an order under s 314A, the period after the issue of the order at which the higher maximum daily penalty applies if disclosure has still not been made. It is proposed to set the period at ten days following the issue of the order.
In order to use the powers described in the new sections, HMRC must have reasonable grounds to suspect that the promoter has been non-compliant in relation to a particular scheme. In most cases, HMRC expect to be able to resolve the issue in an informal way, with use of the powers limited to those occasions where a promoter is unco-operative or judged to be using deliberate delaying tactics; or for resolving genuine disputes as to notifiability.
The powers will be exercised only by officers within HMRC's Anti-Avoidance Group.
The powers described above are mostly dependent upon the Special Commissioners making a relevant order following an application from HMRC. While the precise procedure is a matter for the Special Commissioners, it is anticipated that applications will normally be subject to a hearing involving HMRC and the potentially affected promoter before an order is awarded.
When making an application, HMRC will notify the potentially affected promoter at the same time.
Full details of HMRC's powers are contained in the brief and to which readers are referred. Full details are also included on www.taxation.co.uk.
Revenue & Customs Brief 57/07, 14 August 2007
