The disclosure regime was introduced with effect in August 2004 and was limited in scope to tax arrangements concerning employment or certain financial products. This was widened with effect from August 2006 to the whole of income tax, corporation tax and capital gains tax.
A tax arrangement must be disclosed to HMRC when:
- it will, or might be expected to, enable any person to obtain a tax advantage
- that tax advantage is, or might be expected to be, the main benefit or one of the main benefits of the arrangement, and
- it is a tax arrangement that falls within any description (“hallmarks”) prescribed in the relevant regulations.
In most situations where a disclosure is required it must be made by the scheme “promoter” within five days of it being made available. However, the scheme user may be required to make the disclosure in certain circumstances
Upon disclosure, HMRC issue the promoter with an eight-digit scheme reference number for the disclosed scheme. By law the promoter must provide this number to each client that uses the scheme, who in turn must include the number on his or her return or relevant form.
New powers in the Finance Act 2007 now enable HMRC to enquire into cases of suspected non-compliance by promoters of tax avoidance schemes. They will be able to:
- enquire into the reasons why a promoter has failed to disclose a scheme;
- enforce disclosure in appropriate cases; and
- call for more information where a disclosure is incomplete (new section 308A to the Finance Act 2004).
In the main these powers will be exercisable through the Special Commissioners.
There is also a provision for the Treasury to make regulations that increase the level of daily penalty for failure to disclose a scheme where that failure continues after the Special Commissioners have made an order that it is disclosable.
Full details of the brief on 'Disclosure of avoidance schemes: New information powers' is available on HMRC's website.
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Susie Hughes © Shout99 2007