In ICAEW REP 44/25, ICAEW has responded to the government’s consultation on giving HMRC “additional powers and stronger sanctions” to clamp down on promoters of tax avoidance schemes. The measures proposed by the government were summarised in an earlier article. They include:  

• strengthening and expanding the disclosure of tax avoidance scheme (DOTAS) rules;
• introducing new stop and information notices; and 
• taking action against legal professionals involved in promoting schemes. 

ICAEW’s view 

ICAEW fully supports HMRC’s efforts to tackle the 20 to 30 organisations that HMRC says sell mass-marketed tax avoidance schemes. However, ICAEW is concerned that the burden of many of the proposals will fall disproportionately on the 85,000 compliant tax advice firms. Further, the measures may do little, if anything, to deter promoters and could have unintended consequences, including driving up the cost of tax advice.  

Measures may be ineffective 

ICAEW is concerned that: 

• as many of the promoters have some overseas connections, some of the proposals may lack the necessary reach to tackle the individuals and organisations concerned. ICAEW believes that designing effective measures to tackle offshore promoters might be a reasonable and more proportionate response; and
• as promoters already face the risk of criminal sanctions, increasing the number of potential criminal sanctions may not provide an effective deterrent.  

ICAEW notes that the number of high-risk promoters identified by HMRC has been relatively stable since 2013. This would suggest that new HMRC powers granted since then have had little impact on that cohort but instead have increased the burdens and risks applying to all advisers from inadvertently failing to comply.  

Unintended consequences 

The taxpayers caught up in the arrangements are often on low pay and need to be able to obtain professional and ethical advice at a reasonable cost. ICAEW believes that the proposed changes could drive up the cost of tax advice as reputable advisers add further layers of internal compliance procedures/governance, pushing taxpayers towards less reputable advisers.