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Strengthening Tax Avoidance Sanctions and Deterrents: A discussion document

Strengthening Tax Avoidance Sanctions and Deterrents:

The discussion document sets out the latest Government proposals to combat tax avoidance.


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In the latest Government proposals to combat tax avoidance, HMRC have suggested a wide ranging set of proposals to target those that ‘enable’ defeated tax avoidance and those that use defeated avoidance arrangements. The proposals are intended to ‘raise the stakes’ for those who design, market, facilitate and use tax avoidance, and have received widespread media attention.

The proposals broadly seek to:

  • Introduce sanctions for those who enable tax avoidance in terms of both penalties and ‘naming and shaming’;
  • Propose penalties for those who use tax avoidance schemes which are defeated. These proposals are focussed on defining what does not constitute reasonable care when submitting a tax return which uses a tax avoidance arrangement, thereby widening the ability for HMRC to impose penalties for ‘carelessness’ in such situations; and
  • Set out a ‘chain’ of the decisions involved in the life-cycle of a tax avoidance arrangement, with proposals to change behaviour at each of the decision points.

Whilst much of the text of the document is positioned in relation to mass –marketed schemes, its actual reach is much wider.

The document proposes a definition of ‘enabling’ that includes those that design or market arrangements but also those who arrange access/introductions, deliver and maintain the related infrastructure, and provide financial services.

The definitions of ‘arrangement’ and ‘defeat’ are similarly wide, bringing in not only obvious targets such as arrangements counteracted by the General Anti-Abuse Rule (GAAR) or subject to a Follower Notice, but also DOTAS/DVAS arrangements and arrangements subject to anti-avoidance or unallowable purpose provisions.

The definition of defeat is expected to apply in situations where “there is agreement between the taxpayer and HMRC that the arrangements do not work”. This will raise the possibility that the adviser may be subject to sanctions where a taxpayer exits or settles arrangements, and not just those that fail at litigation.

There is no information about transitional provisions and the application of these proposals to historic arrangements.

Responses to the consultation are due by 12 October 2016. If you have any questions, or you have any comments you would like KPMG in the UK to consider in our response, please contact Sharon Baynham or your usual KPMG contact.


For further information please contact :

Sharon Baynham

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