HMRC consequences for promoters of tax avoidance – Law Society response

HM Revenue and Customs (HMRC) is consulting on Finance Bill 2023-24 proposals to impose tougher consequences on promoters of tax avoidance. Find out what it means for solicitors.

The proposals

The draft Finance Bill 2023-24 introduces a new criminal offence to apply to promoters of tax avoidance who fail to comply with a stop notice.

It provides HMRC with the power to apply to a court for a disqualification order against directors and other persons who control or exercise influence over a company involved in promoting tax avoidance and operating against the public interest.

The draft legislation enacts two main changes:

  • making a strict liability criminal offence for promoters of tax avoidance schemes who continue to promote these schemes after being issued with a stop notice
  • granting HMRC the power to expediate the disqualification of directors or those seen to exercise significant control over the company

The strict liability offence would apply to any person or company subject to a stop notice, including the person who received the stop notice and certain other persons associated with the recipient of the notice.

Our view

The draft legislation for dealing with promoters of tax avoidance schemes will broadly catch the target at which it is aimed.

However, we are concerned the proposals could go considerably wider than that target, giving scope for abuse.

We also question whether there has been sufficient time to assess whether the existing civil regime is effective before introducing criminal powers.

The proposals for director disqualification being implemented have the potential to cause significant harm to persons who are not necessarily parties to tax avoidance schemes.

What this means for solicitors

The draft legislation will offer changes to the tax avoidance landscape for promoters of tax avoidance, which will impact the way solicitors advise.

Next steps

This consultation closed on 12 September 2023.

We were asked to give oral evidence in November to the Finance Bill Sub-Committee. which considers aspects of the Finance Bill from the point of view of technical issues of tax administration, clarification and simplification.

The sub-committee will publish a report with its findings in 2024.

The measure will be enacted by parliament after necessary readings and amendments.

Read the consultation on the GOV.UK website

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