Draft Finance Bill 2016 Clause 63 Serial tax avoidance - CIOT comments

By Technical Team on 02 Feb 2016

The CIOT has raised concerns with HMRC regarding clause 63 of the draft Finance Bill 2016 published in December 2015.  

We are concerned that these proposals give rise to a double penalty; that is the penalty, properly so-called, and the denial of tax reliefs in the future, which is effectively a disguised penalty. Further, the effect of these provisions is to create an absolute offence for tax purposes, because there no requirement of deliberate conduct or carelessness. We consider that the combined effect of these proposals can be to impose disproportionate penalties. Penalties have been held to be contrary to the European Convention when they are disproportionate: note Lindsay v Customs and Excise Commissioners [2002] STC 588.

In addition the transitional rules make these provisions effectively retroactive as they can apply to planning that has already been undertaken if the taxpayer does not correct the return.  Retroactive legislation is potentially contrary to the Convention especially when it is of a criminal nature and there is no special justification.

The full CIOT reponse can be found here.