The government has published draft legislation following their consultation on tougher consequences for promoters of tax avoidance – good news for contractors and temporary workers who are often targeted by such schemes. The new legislation means that persistent promoters of tax avoidance could be subject to:
- issue unlimited fines; and
- up to 2 years imprisonment.
These sanctions would be applicable to those who fail to adhere to a ‘stop notice’ issued by HMRC to suspected promoters of tax avoidance. Importantly, the legislation would be applied retrospectively so all pre-existing stop notices will be impacted.
The new legislation will also capture promoters who hide behind the scenes as shadow directors, putting in place stooge directors to purportedly run the companies that promote the schemes. Sanctions will be applicable to overseas based promoters by using the UK’s extensive tax treaties with other countries.
All of this is very positive as the government presses ahead with plans to more severely tackle those who promote tax avoidance – and rightly so. 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.