The net widens
Hot on the heels of HMRC’s proposed “requirement to correct” comes a further proposal “a requirement to notify”.
Businesses, agents, advisers or any other person creating an offshore “arrangement” (not yet defined) for a UK taxpayer that exhibits certain “specified characteristics” (not yet defined) will be required to notify HMRC of the creation of the “arrangement” and any UK taxpayer using it.
Who is caught?
The primary responsibility to notify lies with the creator of the “arrangement”. HMRC’s view is that the proposed legislation would apply to creators within and without the UK.
Should the creator fail to notify the burden would move to any promoter or marketer of the “arrangement”.
Should the creator and the promoter/marketer fail to notify then responsibility to do so falls on the participator using the “arrangement”. The net is very wide.
What’s in the net?
The details have yet to be finalised but HMRC are likely to expect the notification net to include:
- Details of all involved in the “arrangement”
- Which “specific characteristics” the “arrangement” exhibits
- Details of the transactions and their nature, eg loans
- The purpose of the “arrangement” and how that purpose is achieved
But isn’t the net duplicated?
HMRC are of the view the proposal is similar to DOTAS requirements; responsibility cascading to others if failure to notify occurs with those with primary responsibility.
However, HMRC are also of the view the proposal is fundamentally different to DOTAS. DOTAS requires a UK tax advantage to be obtained. In contrast, the proposals are targeted at tax evasion.
HMRC consider that creators and promoters/marketers who fail to comply should face civil sanctions, such as a penalty, for that failure. HMRC are also considering other options, such as public naming.
In addition, to the specific sanctions applying to notification, if HMRC form the view evasion has occurred they could initiate action under the new criminal sanction of facilitating tax evasion.
Old or new “arrangements”?
HMRC believe it would seriously undermine the proposals effectiveness if it didn’t apply equally to existing “arrangements” as it would to new ones.
The net is therefore very wide.
If you wish to discuss a matter involving the requirement to notify , please contact me at email@example.com or Paul at firstname.lastname@example.org.