The guidance will be included in the second Finance Bill of 2017.
Once passed in to legislation, it will ensure that enablers of abusive tax arrangements are held accountable for their actions through paying penalties, the UK taxman said.
HMRC’s draft guidance aims to clarify how the bill will be implemented by authorities once passed into legislation.
“The legislation will influence and promote behavioural change in the minority of tax agents, intermediaries and others who benefit financially from designing, marketing or facilitating the use of abusive tax arrangements that are defeated,” the document said.
Paying up
Those found guilty of enabling abusive tax arrangements will be hit with a penalty based on “relevant consideration”.
“The amount of the penalty in each case is the total amount, or value, of all the relevant consideration, which has either been received by the enabler or is receivable by them,” the guidance says.
This means the full amount of the consideration received or receivable is included in the calculation of the penalty, with no deduction for any costs incurred by the enabler.
However, any value added tax that may have been charged by the enabler will not be considered in the calculation of the penalty.
The document provided no details of maximum or minimum penalties that could be levied.
Safeguard
The guidance says no penalty can be charged by HMRC unless it has obtained an opinion of the General Anti-Abuse Rule (Gaar) Advisory Panel in relation to the tax arrangements.
Any penalty HMRC levies based on the subsequent Gaar opinion can be appealed.
Abusive arrangements
The draft guidance says a person will only be liable for a penalty under the enablers legislation if the defeated tax arrangements they enabled are deemed abusive.
Tax arrangements will be considered abusive if one of the following applies:
- There is a Gaar counteraction of the tax advantage or tax advantages arising from the tax arrangements, which becomes final.
- The tax advantage or tax advantages arising from the arrangements have been counteracted either by settlement before any counteraction under the Gaar has been taken or under another provision, but could have been counteracted under the Gaar had it not been for the settlement or for that other provision.
An abusive tax arrangement is deemed defeated in the guidance when the tax arrangement does not provide the anticipated tax advantage, either in part or in whole.
