A consultation is underway seeking views on HMRC proposals to close in on promoters and enablers of tax avoidance schemes, as well as support individuals to avoid or get out of illegal operations.

The Payroll Compliance Authority encourages relevant stakeholders to respond, and in this article, we summarise the key details of the consultation.

The issue

HMRC estimates that there is a 'tax gap' of approximately £0.5 billion as a result of marketed and sold avoidance schemes, primarily disguised remuneration schemes.

These schemes generally claim to avoid Income Tax and National Insurance contributions (NICs) on a worker's earnings through various schemes, which are in fact not accepted by HMRC or the courts.

HMRC has identified around 20 to 30 currently active promoter organisations who sell mass marketed tax avoidance schemes, some based offshore and hiding behind complex corporate structures.

Summary details

The current consultation runs until 18 June 2025 and is aimed at any taxpayer, body or business that may have received marketing material, taken advice about, or become involved in arrangements that aim to avoid tax.

The government has drafted potential new measures to clamp down on those who sell these schemes, including by giving additional powers to HMRC. These measures are intended to build on existing powers established over the past six years to publish the names of known promoters and schemes; to issue Stop Notices that legally require promoters to stop promoting particular schemes; and criminal offences for not complying with these Stop Notices.

The existing powers have helped HMRC to close down schemes more quickly, for example, by naming more than 135 schemes, 129 promoters and 50 connected individuals.

This consultation is looking for responses to proposals in four key areas, as summarised below. It is also seeking feedback on other ways the government can support those caught up in tax avoidance schemes.

HMRC estimates that approximately 36,000 individuals used an avoidance scheme in 2022-2023. The department currently contacts anyone identified as potentially entering a tax avoidance scheme within two months and carries out various awareness campaigns to warn against tax avoidance but is looking for responses on further actions it could take to reach and support those who are caught up in illegal schemes.

Expanding the scope of DOTAS

HMRC's Disclosure of Tax Avoidance Schemes (DOTAS) is a 'disclosure regime' introduced in 2004 to provide early information of tax avoidance and it has been updated regularly over the past two decades. Usually, the onus falls on promoters to disclose a new scheme.

First in its 'package of measures' HMRC is looking to widen the scope of DOTAS to more clearly target disguised remuneration schemes, so that promoters are not able to sidestep their obligation to disclose.

To put additional sanctions in place, the consultation proposes making a criminal offence of 'failing to disclose notifiable arrangements to HMRC under DOTAS', with up to two years imprisonment and/or an unlimited fine. Existing civil penalties would also remain in place.

The department is also proposing to move the determination of penalties under DOTAS legislation from the Tax Tribunal to HMRC, whilst retaining a right to appeal to the Tribunal against penalties.

Universal Stop Notice (USN) and Promoter Action Notice (PAN)

The Promoters of Tax Avoidance Schemes (POTAS) legislation was introduced in 2014 to help HMRC tackle promoters. Stop Notices (SNs) were introduced in 2021 to strengthen this regime and are legally enforceable. Where a Stop Notice has been issued, anyone subject to the SN must immediately stop selling and operating the specified scheme.

However, the response is often to close down these schemes, and promote them from a different company, known as 'phoenixing'. For HMRC to issue a new SN for the replacement scheme takes time and administrative resource.

The consultation proposes introducing a Universal Stop Notice (USN) that would require all persons to stop promoting or enabling schemes which are the same or similar to that outlined in the notice, with any breach incurring a range of sanctions.

In addition, introducing 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.

The consultation suggest that it would help these businesses recognise when their products and services are being exploited and provide them with an opportunity to work with HMRC to prevent this happening. The government affirms that receiving a PAN would not indicate wrongdoing and would provide an opportunity for business and HMRC to work together collaboratively.

The consultation invites views on the range of sanctions that would be appropriate for a breach of a USN or PAN and details when breaches could lead to criminal investigations.

Tackling those behind the promotion of avoidance schemes

The consultation states that a 'small but persistent group of individuals' are behind the promotion of most tax avoidance schemes, and they are hidden behind sophisticated and complex structures. HMRC is seeking ways to create a greater deterrent against non-compliance and make it easier to identify and target these individuals.

The government is proposing introducing a targeted Connected Parties Information Notice (CPIN) which would compel persons that HMRC suspects to be connected to the promotion of a marketed tax avoidance scheme to provide relevant information and documents, with strong sanctions for non-compliance.

Where an individual has received a CPIN, they would have to provide information and/or documents in their possession or power that are reasonably required by HMRC for the deployment, monitoring and enforcement of its anti-avoidance powers within a timeframe specified in the notice. Non-compliance could include a criminal offence or civil penalties.

Furthermore, the consultation proposes introducing a Promoter Financial Institution Notice (PFIN), so that HMRC can obtain financial information about promoters from banks and other financial institutions, without the need for Tribunal approval. They would function like an existing Financial Institution Notice (FIN) but apply specifically to promoters of tax avoidance.

Tackling legal professionals

The consultation says that a 'small number of legal professionals' design and promote avoidance schemes themselves - or support in the design and promotion of such schemes. This activity is often protected by legal professional privilege (LPP), making it difficult for HMRC to clamp down.

The consultation proposes several steps to address this challenge, including legislative changes and introducing a 'waiver of LPP' in certain circumstances.

Future steps

The detailed consultation is also seeking views on how it can continue to root out tax avoidance schemes in future. It asks for responses in relation to creating new criminal offences, providing HMRC with new tools with which to take quick and decisive action, and taking advantage of advances in technology.

The full consultation is available to read and respond to here.