Details of the Schedules
Schedule 34, Part 1
49.Part 1 includes the threshold conditions. If a promoter has met any one of the 11 conditions in Schedule 34 in the last three years it is to be considered for a conduct notice.
50.Paragraphs 2 to 12 set out the 11 conditions.
51.Paragraph 2 sets out the first condition which relates to the publication of information about the promoter as deliberate tax defaulter.
52.Paragraph 3 sets out the second condition which relates to the promoter being named in a report for a breach of the Code of Practice on Taxation for Banks.
53.Paragraph 4 sets out the third condition which relates to the promoter receiving a conduct notice as a dishonest tax agent.
54.Paragraph 5 sets out the fourth condition which is that the person has failed to comply with an obligation either to disclose a tax avoidance scheme or to provide details of clients to HMRC. Subparagraph (2) provides that the condition is met even if the person had a reasonable excuse for failing to meet the obligation.
55.Paragraph 6 sets out the fifth condition which is that the promoter has been charged with a specified tax offence. Subparagraphs (2) and (3) make provision about acquittals and similar matters. Subparagraph (4) sets out the offences which are to be taken into account.
56.Paragraph 7 sets out the sixth condition which is that the majority of a sub-panel of the General Anti-Abuse Rule Advisory Panel has given an opinion that entering into one of the promoter’s tax avoidance schemes is not a reasonable course of action.
57.Paragraph 8 sets out the seventh condition which is that the promoter has been found guilty of misconduct by a professional body. Subparagraph (2) restricts the type of misconduct to which the paragraph can apply. Subparagraph (3) lists relevant professional bodies and paragraph 15 allows additions to the list by regulations. HMRC will be consulting with professional bodies to identify the relevant offences so that they may be prescribed in regulations.
58.Paragraph 9 sets out the ninth condition which is that a regulatory authority has imposed a sanction on the promoter. Subparagraph (2) requires HMRC to specify the sanctions to which the paragraph applies. Subparagraph (3) lists relevant regulatory authorities and paragraph 15 allows additions to the list by regulations. HMRC will be consulting with regulatory authorities to identify the relevant offences so that they may be prescribed in regulations.
59.Paragraph 10 sets out the ninth condition which is that the promoter has failed to comply with an information notice issued by HMRC.
60.Paragraph 11 sets out the tenth condition which is that the promoter has required a client to keep details of a tax avoidance scheme confidential from HMRC or to contribute to a fighting fund. Subparagraphs (2) and (3) set out the circumstances in which a person is regarded as having required a client to keep details of a scheme confidential. Subparagraph (4) sets out what is meant by requiring a client to contribute to a fighting fund and includes requiring a client to take out an insurance policy. Subparagraph (5) provides that the condition is only met in respect of a contribution to a fighting fund if the client is also prevented from settling with HMRC without the promoter’s permission. Subparagraphs (6) and (7) contain definitions.
61.Paragraph 12 sets out the eleventh condition which is that the promoter has continued to market or make available a tax avoidance scheme after being given a notice to stop following a judicial ruling. Subparagraph (2) explains which tax avoidance schemes are affected. Subparagraph (3) explains when a stop notice may be given. Subparagraph (4) sets out what a stop notice must contain. Subparagraphs (5) and (6) make provision for the withdrawal of a stop notice. Subparagraph (7) makes provision about when a stop notice takes effect. Subparagraph (8) gives the meaning of terms used.
Schedule 34, Part 2
62.Part 2 describes how a body corporate meets the threshold conditions. Paragraph 13 makes provision about when a person’s breach of a threshold condition may be imputed to a body corporate which that person controls.
Schedule 34, Part 3
63.Part 3 includes the power to amend the threshold conditions. Paragraph 14 allows the Treasury to amend any of the conditions or to add new ones. HMRC will be drafting a threshold condition for associated and successor businesses of a monitored promoter. Draft regulations will be issued for comment in due course for this threshold condition and for the relevant offences for paragraphs 8 and 9 (disciplinary action by a professional or regulatory body).
Schedule 35
64.Paragraph 1 explains what is meant by an information duty.
65.Paragraph 2 sets out the maximum penalties for failing to comply with the various obligations in the legislation. Subparagraph (2) makes it clear that for certain of the penalties the maximum can be imposed in respect of each person to whom or about whom information has not been provided. Subparagraph (3) provides for increasing penalties where there is repeated failure to provide HMRC with a promoter’s reference number. Subparagraph (4) sets out the considerations to be taken into account by the Tribunal when determining the amount of the penalty and in particular provides for the level of fees or the amount of tax advantage to be taken into account.
66.Paragraph 3 provides for daily penalties where a failure to comply continues after an initial penalty has been imposed. Subparagraph (2) sets out the maximum daily penalties.
67.Paragraph 4 provides for a penalty where inaccurate information or an inaccurate document has been provided. Subparagraph (2) covers the situation where the inaccuracy is careless or deliberate. Subparagraph (3) explains what is meant by careless. Subparagraphs (4) and (5) set out circumstances in which legal advice cannot be relied upon. Subparagraph (6) covers the situation where HMRC is not informed of an inaccuracy in a document. Subparagraph (7) covers the situation where an inaccuracy is discovered subsequently but HMRC is not informed. Subparagraph (8) sets out the maximum penalties for inaccuracies. Subparagraph (9) makes it clear that there is only a single penalty although there may have been multiple inaccuracies in the same document or information.
68.Paragraph 5 allows the Treasury to adjust the maximum penalties by regulations.
69.Paragraph 6 provides for penalties where a promoter or intermediary destroys or conceals documents that it has a duty to produce under certain of the provisions in the legislation. Subparagraphs (2) and (3) set out circumstances in which a penalty will not apply. Subparagraph (4) provides that the destruction or concealment of a document will count as a failure to produce the document. Subparagraph (5) sets out the priority rules if a document is required under more than one provision.
70.Paragraph 7 provides for penalties where documents are destroyed or concealed after HMRC has given informal notification that the documents will be required.
71.Paragraph 8 provides for cases where HMRC or the Tribunal extend the time limit for complying with an obligation.
72.Paragraph 9 provides that there is no penalty where there is a reasonable excuse. Subparagraph (2) makes provision about what does and does not constitute reasonable excuse. The subparagraph includes the higher standards of reasonable excuse for monitored promoters and their clients.
73.Paragraph 10 brings the assessment of the penalties within the provisions of part 10 of the Taxes Management Act 1970. In particular this has the consequence that all penalties except daily default penalties under paragraph 3(2)(b) are assessed by Tribunal rather than HMRC, and it provides promoters with the ordinary rights of appeal against penalties.
74.Paragraph 11 provides for the penalties to carry interest.
75.Paragraph 12 prevents a penalty being charged where someone has been convicted for the same offence.
76.Paragraph 13 prevents the duplication of penalties where a promoter reference number has been omitted from a tax return.
Schedule 36 – Partnerships Part 1
77.Part 1 describes how partnerships are to be treated as persons.
78.Paragraph 1 provides that where persons are carrying on a business in partnership the partnership is regarded as a person for the purposes of the legislation and imports the meaning of partnership from the Partnership Act 1890. Partnerships that are not separate legal entities are not subject to Schedule 36.
79.Paragraph 2 provides that a partnership is regarded as the same partnership and same person despite changes in the members of the partnership as long as there is at least one person who was a member of the partnership before and after the change.
80.Paragraph 3 describes the acts and omissions which are treated as acts or omissions of the partnership. Subparagraphs (2) and (3) explain which partners are relevant for the purposes of the paragraph. Subparagraph (4) imports the meaning of firm from the Partnership Act 1890.
81.Paragraph 4 provides that if a controlling partner or a managing partner of a partnership meets a threshold condition in a personal capacity the partnership is treated as having met that threshold condition. Subparagraph (3) explains which threshold conditions are relevant for the purposes of the paragraph.
Schedule 36 - Partnerships Part 2
82.This part applies the main sections to partnerships with relevant modifications.
83.Paragraph 5 permits a conduct notice to impose conditions on both current and future members of the partnership. This paragraph also requires that a conduct notice given to a partnership must state it is a partnership conduct notice; paragraph 6 has the same provision for monitoring notices.
84.Paragraph 7 is the first paragraph dealing with the continuity of conduct notices and monitoring notices when a partner leaves a partnership or a partnership breaks up. It applies where a partnership breaks up and the business is carried on by an ex-partner as a sole trader. In these circumstances the monitoring notice or conduct notice continue to have effect in relation to the sole trader just as they did for the partnership.
85.Paragraph 8 applies where a controlling member of a partnership that is subject to a conduct notice leaves the partnership. Subparagraphs (2) and (3) give an authorised officer the power to give P a conduct notice, or if P is a controlling member of a new partnership, give the new partnership a conduct notice. Subparagraphs (4) and (5) provide for two circumstances where the conduct notice ceases to have effect. The first is where P leaves the new partnership; the second is if the term of the original conduct notice has expired.
86.Paragraph 9 makes similar provision where the controlling member of a partnership that is subject to a monitoring notice leaves the partnership.
87.Paragraph 10 applies where a partner leaves a partnership that is subject to a conduct notice or monitoring notice (the original notice) and takes part of the partnership business (“the transferred part”) with them when they depart. Under subparagraphs (3) and (4) an authorised officer may give an equivalent notice (the replacement notice) to the departing partner or to the departing partner’s new partnership if that partnership is carrying on the transferred part of the promotion business. The new conduct notice or monitoring notice ceases to have effect on the new partnership if P leaves the partnership or the original notice ceases to have effect.
88.Paragraph 11 provides the definitions of “original conduct notice”, “original monitoring notice”, “replacement conduct notice” and “replacement monitoring notice”. It also provides that the replacement conduct notice will have no effect after the termination date of the original conduct notice. Paragraph 12 provides that a replacement conduct notice cannot survive the termination of the original notice which preceded it.
89.Paragraph 13 provides that a replacement conduct notice or monitoring notice cannot be given to a person if an original notice still has effect in relation to them.
90.Paragraph 14 provides that where a monitored promoter is in partnership the details to be published by HMRC are to relate to the partnership and not the partners.
Schedule 36 - Partnerships Part 3
91.This part of the Schedule provides for the responsibilities of the partners for meeting the obligations imposed under this Part of the Act. Paragraph 15 provides that all responsible partners are required to comply with notices given under the legislation. Subparagraph (1) gives the meaning of responsible partners. Subparagraph (4) sets out which partners can exercise a right of appeal.
92.Paragraph 16 provides that the responsible partners are jointly and severally liable to penalties and interest on penalties. Subparagraph (2) explains from which partners penalties and interest cannot be recovered. Subparagraph (3) defines relevant time for the purposes of subparagraph (2).
93.Paragraph 17 explains to which partners or partner HMRC may serve a notice. Subparagraph (2) gives the meaning of representative partner for the purposes of the paragraph. Subparagraph (3) explains when a designation (or revocation of a designation) of a representative partner by HMRC has effect.
94.Paragraph 18 allows the partners to nominate a partner (the “nominated partner”) to meet the obligations of the responsible partners on their behalf.
Schedule 36 - Partnerships Part 4
95.This part of the Schedule contains the definitions for the Schedule. Paragraph 19 provides the definition of “controlling member” and paragraph 20 the definition of “managing partner”. This part also includes in paragraph 21 a power to amend paragraphs 19 and 20.