HMRC has recently been consulting on “Tougher Sanctions Against Promoters Of Tax Avoidance” which had two main proposals: firstly new criminal offence for promoters who continue marketing a scheme after a stop notice has been issued; and secondly speeding up disqualification of directors of companies involved in promoting tax avoidance schemes.
These are both laudable proposals worthy of our support, but they do unfortunately fall short of what is actually needed. In our response to the consultation we have pointed out that the well known main route to market for tax avoidance schemes is via recommendations by recruitment agencies to their workers. We have called for tough action against the recruiters referring people to tax schemes, and we have suggested that the Enablers Penalty (or something similar to it) be made applicable in this circumstance.
Bringing in a significant financial penalty against referrers’ to tax schemes, whether or not the scheme is later defeated by HMRC, will be effective in cutting off schemes route to market via recruitment agencies. We suggest that the penalty be applicable personally to the individual making the referral, and with the ability for the debt to transfer to their employer. This dual approach would deter the individual from making spurious recommendations to schemes, and also ensure that their employer has policies and processes in place to prevent the referrals taking place.
HMRC themselves acknowledge that 99% of the tax avoidance market involves disguised remuneration schemes targeting contractors and agency workers, so it is clear that urgent action is needed in our sector.