Promoters of aggressive UX tax avoidance schemes face £1m fines

HM Revenue & Customs is ramping up the pressure on tax avoidance by warning promoters of aggressive schemes that they will potentially face fines of up to £1m.

It has written to several firms that have been identified as potentially "high-risk promoters" under measures introduced in the latest finance bill aimed at stamping out aggressive avoidance.

David Gauke, a Treasury minister, said the move would "tackle the small minority of tax advisers who are persistently uncooperative and are not transparent in their dealings with HMRC".

The initiative is part of a concerted effort to crack down on tax avoidance schemes amid widespread public anger. It has already reduced the number of new schemes by more than three-quarters from 116 schemes in 2009-10 to 28 in 2013-14.

HMRC said it had issued a clear warning to the promoters - at present fewer than five firms - to improve their behaviour but it would follow up with formal action if no changes were made.

Mr Gauke said the move would "help protect taxpayers from unscrupulous promoters" but taxpayers needed to be aware of the risks of subscribing to aggressive tax planning schemes.

In HMRC's latest publicity drive against avoidance, it published a list of "10 things a promoter won't always tell you" that included not only the possible monetary costs and reputational damage of tax avoidance, but also the risk of a potential criminal conviction if information is concealed from the authority.

Mr Gauke said: "The government has taken unprecedented steps to clamp down on the selfish minority who practise tax avoidance, because we are firmly on the side of the vast majority of taxpayers who play by the rules. As a result, tax avoidance is now very high risk."

Jennie Granger, director-general of enforcement and compliance at HMRC, told a conference in London that the "game changer" in tackling avoidance were new "accelerated payments" rules that force users of tax avoidance schemes to pay the disputed tax up front. She said: "It sends a strong signal that there is no cash flow advantage to be gained by entering into or staying in these schemes."

She said HMRC was also telling taxpayers that "it is simply too risky to get involved" by publicising its 80 per cent success rate in avoidance litigation, undertaking targeted campaigns and using "nudge" style behavioural insights to deter avoidance.

The crackdown on high-risk promoters in this year's finance bill is aimed at about 20 firms that HMRC believes are responsible for aggressive and contrived avoidance schemes. It will give HMRC the power to monitor certain firms, which if they breach certain conditions, will be publicly identified and forced to hand over information about their products and clients.

Ms Granger said the rules were aimed at tackling a "a hardened minority" of tax advisers who were creating and promoting schemes. She said: "The new high-risk promoters rules are designed to encourage promoters to improve their behaviour. If they don't change their ways, we'll be able to apply to the tax tribunal to badge them as high-risk and so help steer the public away from engaging with them."

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