HMRC’s proposals would allow a criminal offence to be applied where promoters continue to promote a scheme after a stop notice has been issued, and directors to be disqualified in some situations.
HMRC has had the power since 2021 to issue stop notices to tax avoidance scheme promoters. These notices are designed to bring an immediate cessation of all promotional activity of the scheme covered by the notice. This makes it unlawful for a person subject to the notice to continue to promote the scheme in question.
Failure to comply with the obligations imposed by a stop notice can currently lead to substantial civil penalties. However, HMRC does not consider that this is a sufficient deterrent to some of the more egregious promoters who have continued to promote schemes despite a stop notice being issued. It has therefore been consulting on the introduction of a criminal offence for failure to comply with a stop notice.
In its response to the consultation, ICAEW’s Tax Faculty expressed a concern that persons could be found guilty of the proposed criminal offence even where the stop notice is subsequently overturned. It therefore suggested a safeguard designed to prevent this outcome. While a criminal offence case could be referred to the crown prosecution service when the person doesn’t comply with the stop notice, if the person wins their appeal against the notice, the safeguard would be that the criminal case would not be taken to court.
The faculty also suggested:
- having stop notices being issued at a higher level of seniority within HMRC than at present; and
- introducing a sunset clause for the criminal offence measure, such that its effectiveness and necessity must be assessed in the future. It could also be the subject of independent parliamentary scrutiny after several years.
The same consultation document included a proposal that individuals who control or exercise influence over a company involved in the promotion of tax avoidance could be disqualified from being a director of this or any other current or future company. The faculty’s response suggests that a safeguard should be introduced to prevent directors from being disqualified where they can demonstrate:
- that they had no knowledge of the promoter activities of the company concerned; and
- that they have not been appointed to conceal the identity of individuals instrumental in promoting these activities who were acting as ‘shadow directors’.
ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.