Does HMRC’s new tax offence plan go too far?

The CIOT has warned HMRC against creating a new strict liability criminal offence for failing to disclose notifiable arrangements under the Disclosure of Tax Avoidance Schemes (DOTAS) regime without a reasonable excuse. The Institute argues that DOTAS is much too wide in its current formulation to be suitable for a criminal offence, and that applying the proposed offence to all the DOTAS hallmarks¹ seems excessive, especially since the proposal is intended to be a response to specific issues with disguised remuneration mass-marketed tax avoidance schemes. 

John Barnett, CIOT’s Vice President, said: 

“The government are right to be taking a robust approach to those who continue to devise, promote or sell mass-marketed tax avoidance schemes. There should be no place for such people and their schemes in the tax services market. 

“However, every proposal to increase HMRC’s powers like this needs to be tested against a hypothetical test of what would happen if an HMRC officer decides to use or target the legislation inappropriately. The present proposal places too high a level of reliance on HMRC’s unpublished (and as such, not transparent) internal governance process to provide appropriate, independent safeguards and work effectively, so that such an outcome could never happen in practice. 

“It is essential for building and maintaining trust in the tax system that the way HMRC use their powers and operate safeguards can be effectively monitored and subjected to appropriate oversight.” 

The government’s consultation² is also seeking views on a range of other new measures to close in on promoters of tax avoidance, including introducing a Universal Stop Notice³ (USN) and Promoter Action Notice⁴. In its response⁵, the CIOT recognised that there is a problem with phoenixing⁶ of companies by promoters and supported these proposals in principle. However, it expressed concerns that a person in breach of a USN could also potentially face criminal prosecution, through the creation of a new strict liability criminal offence of failing to comply with a USN.  

John Barnett added: 

“We would support HMRC publishing more information externally about how decisions to issue stop notices are made and how their internal governance process works. This would improve the transparency of the regime and help provide reassurance to external stakeholders that it is working as intended and being targeted appropriately.” 

On further measures to close in on promoters of tax avoidance, the CIOT has supported the  proposal to bring in the registration of all tax advisers who interact with HMRC on behalf of their clients which is due to be introduced from April 2026. We also look forward to working with HMRC on other measures in to tackle bad actors in the tax advice market and  this consultation needs to be viewed in the wider context of the government’s commitment to raise standards in the tax advice market generally.  

John Barnett explained: 

“In the absence of a registration scheme for all tax advisers (not just those who directly interact with HMRC – which most of these promoters don’t), none of the measures being proposed in this consultation would prevent someone who is penalised or even convicted of an offence from continuing to provide tax services. Likewise, professional bodies like the CIOT can expel advisers from membership, but even this does not stop them providing tax services.  

“Another challenge for HMRC is how to deal with promoters who are based outside the UK as it seems most of those left in the market are. To date, HMRC have struggled to tackle promoters effectively who are not based in the UK because it is harder to enforce information notices, penalties and criminal offences against them. It is not clear how these proposals will overcome what is seemingly one of the most difficult barriers to the effectiveness of HMRC’s existing powers.”  

Finally, the CIOT has highlighted that a significant amount of legislation has been introduced and added to over the past decade to tackle problems in the tax avoidance market that existed at the time. However, the market has changed over the intervening period, with the scale of avoidance reducing significantly, and what remains is now dominated by mass-marketed disguised remuneration schemes and about 20 to 30 active promoters.  Given this, the Institute has recommended that a review of all legislation aimed at promoters of tax avoidance should take place to examine whether it is all still fit for purpose and operating effectively. 

^{Notes for Editors} 

^{1. A DOTAS hallmark is a feature of a tax arrangement that must be disclosed to HMRC because it suggests potential tax avoidance. Hallmarks are set out in legislation.} 

^{2. Closing in on promoters of marketed tax avoidance} 

^{4. A Universal Stop Notice (USN) would require all persons to stop promoting or enabling schemes which are the same or similar to that outlined in the notice. If the changes became law, HMRC would issue USNs so that any promotion and enabling of schemes with arrangements similar to those described in a USN would constitute a breach of the USN.} 

^{5. A Promoter Action Notice (PAN) would require businesses to stop providing products or services to promoters and enablers of tax avoidance where those products or services are connected to the promotion of avoidance.} 

^{6. CIOT’s response to the HMRC consultation}