The government has proposed a £1m penalty plus daily penalties for cowboy advisers who promote tax avoidance schemes, in an effort to deter people pushing these deals.
In a HM Revenue & Customs consultation, Raising the stakes on tax avoidance, HMRC said some advisers who promote tax avoidance schemes are not or do not want to be transparent with the tax office and labelled these advisers “potentially high risk promoters”.
HMRC said they commonly display other behaviours that are detrimental to the fairness of the tax system such as designing, marketing or implementing products that on analysis have negligible probability of working; relying on non-co-operation with HMRC to achieve a tax advantage for their clients; selling products that rely on concealment and mis-description of elements to succeed.
The government has proposed an initial £1m penalty following by a daily penalty for continuing to provide the information of £10,000.
The government said it is “important” to make sure that high risk promoters have an incentive to meet their obligation to let intermediaries and users know of their high-risk status.
Therefore the government proposes that there should be a financial penalty on those high-risk promoters who do not comply with this obligation.
It is proposed that a £5,000 penalty be levied to each user not informed of the high risks.
The consultation said: “Penalties are designed to act as incentives to taxpayers to comply with their tax obligations, and to reassure those who do comply that they will not be disadvantaged in comparison with those who do not.
“A regime of penalties must work to achieve these objectives efficiently, and include proper safeguards.”
The consultation paper highlighted that “reputable advisers” recognise it is their professional responsibility to be transparent, adding that promoters of tax avoidance schemes are “out of step” with the way in which HMRC’s works.
The consultation closes on 4 October.