PCRT helpsheet: DOTAS, follower notices, accelerated payment of tax and POTAS

This helpsheet provides further guidance on the application of the Fundamental Principles and Standards covering the Disclosure of Tax Avoidance schemes (DOTAS), follower notices, accelerated payment of tax and Promoters of Tax Avoidance schemes (POTAS). There are ongoing changes in these areas and members should ensure they are aware of the most up-to-date position. See also HMRC guidance.


Main regime


Follower notices and accelerated payments of tax

Accepting HMRC settlement opportunities


Threshold conditions and conduct notices

Monitoring notices


There are two different regimes covering the disclosure to HMRC of certain tax arrangements. Under the VAT Avoidance Disclosure Regime (VADR) responsibility currently lies with the taxpayer to make the disclosure; for other taxes the responsibility will usually lie with the promoter of the arrangement, although the taxpayer may have a disclosure obligation in certain circumstances.

Once a disclosure has been made HMRC may issue a Scheme Reference Number to the arrangements. The issuance of a SRN does not mean that HMRC has accepted the arrangement. Disclosure is not a clearance or an approval process. Similarly, disclosure of an arrangement does not mean it includes ‘tax avoidance’.

The responsibility of the member is to be aware of the rules, to comply with them and to advise clients as to their obligation. The member should also advise clients of the consequences of failure to comply.

Failure to comply with the regime can have a number of adverse consequences including:

  • Failing to disclose an arrangement within the relevant time limits can incur significant penalties of up to £1 million as well as reputational damage to the member.
  • Failing to disclose an arrangement or failing to supply details of clients who have implemented disclosed planning (quarterly client lists) constitutes meeting a threshold condition for the Promoters of Tax Avoidance Schemes (POTAS) regime and may therefore result in the issuance of a conduct notice to the promoter (see section: Threshold conditions and conduct notices below).

The onset of Accelerated Payment Notices and Partner Payment Notices for DOTAS arrangements means that the focus on compliance with the regime is starting to increase.

The member should also advise clients of the consequences, including penalties, of failure to comply with their DOTAS obligations.

Main regime

This regime applies to income tax, corporation tax, capital gains tax, inheritance tax, stamp duty land tax, annual tax on enveloped dwellings and national insurance contributions. The paragraphs below address the professional conduct issues where a generic disclosure requirement falls upon a member as a promoter of disclosable arrangements for taxes other than VAT. For technical details of the scope and application of such obligations, reference should be made to the relevant legislation and HMRC’s guidance published on GOV.UK.

A member should be aware of the type of tax advice and actions which could cause them to be designated as a promoter for DOTAS purposes and be able to identify potentially disclosable items in respect of the taxes upon which he advises. This is particularly important since some planning which may require disclosure may not intuitively appear to be within the scope of the regime and there are very tight time limits.

Under the regime applicable at the time of publishing this guidance, the obligation falls upon any ‘promoter’ but excludes employees of promoters. A member who is an employee of a promoter is accordingly not legally responsible under the applicable legislation for their employer’s compliance and the rest of this guidance should be read with this in mind. A member who is not comfortable with the approach their employer is taking to such obligations should consider seeking advice.

Failure to comply with the disclosure regulations may result in significant penalties and reputational damage both for promoters and scheme users and will potentially bring the promoter within the scope of the POTAS regime. HMRC has indicated that such failure will be viewed seriously.

As set out in Fundamental Principles a member must observe client confidentiality unless there is a legal or professional right or duty to disclose the information. In this regard, the regime requires the promoter to provide certain details to HMRC in respect of clients who have entered into disclosed arrangements within a prescribed period of time. Details are set out in the HMRC guidance referred to above.

Although a member may take advice from others, such as Counsel, or listen to the views of their client upon disclosure regime matters, the member remains responsible for the disclosure and should not cede control over such decisions to their client or third parties.

A member should put in place instructions, systems and processes to ensure compliance with their disclosure obligations to the extent appropriate given the size of the practice and the frequency with which they are involved in areas which could give rise to disclosure obligations.

It should be noted that accelerated payments of tax and NIC can be demanded by HMRC in DOTAS cases. This will raise the profile of compliance with the regime and emphasises the need for a member to put in place sound governance.

Where a disclosure obligation falls upon the client, and the role of the member is one of advising this client on disclosure obligations and drafting disclosures for client approval where instructed to do so, reference should be made to Tax returns for the relevant professional conduct guidance.


There are specific requirements for the disclosure of VAT avoidance schemes. The client must inform HMRC if they take part in a ‘listed scheme’ as defined by the legislation as one that is specified as a ‘designated scheme’.

A limited exception from disclosure applies if the client’s annual turnover (or if part of a group the turnover of the group of which the client is a member) is less than a designated threshold.

Additionally, the client, or any taxable person who participates in a scheme whose purpose is to obtain a tax advantage, must notify HMRC if it triggers certain ‘hallmarks of avoidance’. Someone acting purely in an advisory capacity is not considered to be party to a scheme, so is not required to make the notification.

A member may consider whether their clients would benefit if any tax avoidance scheme that they were promoting was ‘Voluntarily Registered’ with HMRC. In this way, the member would be issued with a SRN by HMRC, which the member should pass on to their client. The client then is exempted from the requirement to notify such schemes to HMRC. However, the Voluntary Registration scheme does not exempt the client from the requirement to notify their use of a ‘listed scheme’.

Follower notices and accelerated payments of tax

Follower notices may be issued by HMRC where the taxpayer has obtained a tax advantage, there is a live appeal or open enquiry and where there has been a final judicial ruling by the Tribunal or Courts in a case that is relevant to the position of the taxpayer and the taxpayer has not accepted that result.

A member should advise the client as to the consequences of not complying with the notice and the potential penalty of 50% of the denied advantage. A member should consider seeking specialist advice.

HMRC can issue an accelerated payment notice if:

  • There is an enquiry in progress or a pending appeal;
  • The return/claim has been made on the basis that the tax advantage results from the scheme; and;
  • One of the three tests set out below are met:
    • A follower notice has been issued; or
    • The disputed tax relates to an arrangement which is both notifiable under the DOTAS rules and which has been allocated a DOTAS SRN; or
    • A GAAR counteraction notice has been issued.

Accelerated payment notices require payment of the disputed tax within 90 days of the date the notice was given. However, although the notice cannot be appealed the client can make representations to HMRC about the amount or about one of the conditions set out in above not being met.

When a member’s client receives a notice the following should be considered as soon as possible:

  • Have the conditions in the legislation been met such that the notice has been validly issued? If not, is there scope for a Judicial Review challenge?
  • Is the HMRC calculation correct?
  • Should representations be made to HMRC regarding the tax demanded within the 90 day limit, which will then delay the payment date?
  • Does the client wish to consider settlement of the case with implications for penalties, interest, potential ‘success’ fees to a promoter and the risk of jeopardising the chances of a claim against the promoter? The member should advise the client to check the terms of engagement with the promoter to ascertain whether there are any restrictions on their agreeing or settling with HMRC;
  • Should the client seek a closure notice to accelerate the appeal process?
  • Should the client explore a time to pay arrangement for a settlement or for an accelerated payment?
  • Will there be other consequences for the client’s tax affairs?

Accepting HMRC settlement opportunities

Sometimes HMRC will give taxpayers a chance to settle their tax liabilities by agreement, without the need for legal action. HMRC has stated in its Litigation and Settlement Strategy that ‘HMRC will not settle by agreement for an amount which is less that it would reasonably expect to obtain from litigation'. 

Where there is not an official settlement opportunity an approach can be made to HMRC to settle the tax and withdraw from the scheme, usually by contract settlement.

Where HMRC communicates a settlement opportunity in relation to a client’s tax affairs a member should only provide advice on the settlement if competent to do so. If the matter is not within the member’s competence they should recommend that the client gets specialist advice.

The member should:

  • Check the technical accuracy of the proposed settlement.
  • Explain the terms of the settlement opportunity to the client including the quantum and timing of any tax that may need to be paid under the settlement.
  • Explain the alternatives to settling and the tax consequences.
  • Where a taxpayer declines the settlement opportunity, HMRC has stated that it will increase the pace of its investigations and move disputes quickly to legal action. Where the client does not want to settle the member must make sure the client understands the consequences of not settling including the reputational aspects of proceeding to litigation.


The POTAS regime was introduced in 2014 to deal with the threats posed by tax advisers who HMRC consider to be high risk. HMRC has said ‘The purpose of the POTAS legislation is to deal with a small number of promoters who operate in a culture of non-disclosure, non-co-operation and secrecy. For such promoters, the meeting of threshold conditions will be a recognisable part of continuing and deliberate patterns of behaviour’.

The regime uses a series of threshold conditions to identify advisers that might be high risk and allows HMRC to issue conduct notices imposing certain conditions on the adviser. If a conduct notice condition is considered to be breached HMRC can apply to the Tribunal for a monitoring notice. If the application is successful the adviser is ‘monitored’ and is subject to additional reporting requirements, significant penalties and ‘publicity’ provisions. To fall within the POTAS regime the adviser must be a ‘promoter’ and this definition is very similar to the DOTAS regime definition of ‘promoter’.

Threshold conditions and conduct notices

If one or more threshold conditions is met, an authorised HMRC officer is obliged to issue a conduct notice to the promoter, subject to safeguards (or filters) relating to significance and tax impact.

The threshold conditions are as follows:

  1. HMRC publishing information about the promoter as a deliberate tax defaulter;
  2. The relevant person has been named in a report under the Code of Practice on Taxation for Banks by reason of promoting arrangements which they cannot reasonably have believed achieved a tax result which was intended by Parliament;
  3. The promoter is given a conduct notice as a dishonest agent;
  4. The promoter fails to meet DOTAS obligations (reasonable excuse is ignored for these purposes);
  5. The promoter is charged with a relevant criminal offence (even if not yet found guilty);
  6. Arrangements that the adviser has promoted are regarded as unreasonable by a majority of the GAAR advisory panel;
  7. A professional body of which the promoter is a member takes disciplinary action against him;
  8. A regulatory authority imposes certain sanctions on the promoter;
  9. The promoter fails to comply with an information notice;
  10. The promoter imposes certain restrictive contractual terms on clients; and
  11. The promoter continues to promote arrangements despite being given a stop notice in respect of those arrangements.

If conditions 1,2,3,5 or 6 are met they cannot be regarded as insignificant and a conduct notice must be issued unless the tax impact safeguard applies. The HMRC officer will usually discuss matters before issuing a conduct notice to allow for isolated or trivial compliance failures.

A conduct notice can last for up to two years. There is no right of appeal against a conduct notice.

Legal advice should be obtained where a member is:

  • Contacted by an authorised officer, who advises a conduct notice may be issued;
  • Issued with a conduct notice;
  • Aware that they have breached the conduct notice conditions thereby rendering themselves liable to HMRC approaching the First-tier Tribunal to authorise a monitoring notice, which can result in significant compliance conditions and increased penalties, as well as business threatening reputational consequences;
  • Aware other proceedings may be taken against them; or
  • Not confident of the legal position.

Monitoring notices

Where HMRC consider that a condition in a conduct notice has been breached it can apply to the First-tier Tribunal for approval to issue a monitoring notice. A member may make representations to the tribunal in respect of the monitoring notice but there is no specific right for a member to appear in front of the tribunal. A member may appeal the tribunal’s decision to approve a monitoring notice.

Once the issuance of a monitoring notice is approved by the tribunal additional consequences arise for both the promoter and their client.

For the monitored promoter:

  • Certain ‘publication’ provisions apply including HMRC publishing that the promoter is monitored and has failed to comply with a conduct notice, requirements that the promoter must advise of their ‘monitored’ status on the internet and all other publications and correspondence, and requiring the promoter to provide clients with their unique ‘Promoter Reference Number’ (PRN).
  • Enhanced information powers for HMRC in relation to the promoter’s activities and clients, backed by new penalties. These override the client confidentiality provisions as detailed in the guidance on Fundamental Principles (see sections: Confidentiality) and Dealing with irregularities).
  • Other matters such as limitations to the defence of reasonable excuse, and a criminal offence of concealing, destroying or disposing of documents.

For clients of the monitored promoter:

  • A duty to notify HMRC of use of the monitored promoter’s arrangement with high penalties for non- compliance and extended time limits for assessments.

Most of the additional provisions are effective once the tribunal has confirmed the monitoring notice. However, the provisions that involve publicising the monitored promoter do not come into force until any appeal process in relation to the imposition of the notice has been exhausted.