Finance Act 2020

Tax avoidance and tax evasion cases

2 (1) An authorised HMRC officer may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to E are met.

(2) Condition A is that a company has—

(a) entered into tax-avoidance arrangements, or

(b) engaged in tax-evasive conduct.

(3) Condition B is that—

(a) the company is subject to an insolvency procedure, or

(b) there is a serious possibility of the company becoming subject to an insolvency procedure.

(4) Condition C is that—

(a) the individual—

(i) was responsible (whether alone or with others) for the company entering into the tax-avoidance arrangements or engaging in the tax-evasive conduct, or

(ii) received a benefit which, to the individual’s knowledge, arose (wholly or partly) from those arrangements or that conduct,

at a time when the individual was a director or shadow director of the company or a participator in it, or

(b) the individual took part in, assisted with or facilitated the tax-avoidance arrangements or the tax-evasive conduct at a time when the individual—

(i) was a director or shadow director of the company, or

(ii) was concerned, whether directly or indirectly, or was taking part, in the management of the company.

(5) For the purposes of sub-paragraph (4)(a)(ii)—

(a) an individual is treated as knowing anything that the individual could reasonably be expected to know;

(b) an individual is treated as receiving anything that is received by a person with whom the individual is connected (within the meaning given by section 993 of ITA 2007).

(6) Condition D is that there is, or is likely to be, a tax liability referable to the tax-avoidance arrangements or to the tax-evasive conduct (“the relevant tax liability”).

(7) Condition E is that there is a serious possibility that some or all of the relevant tax liability will not be paid.

(8) A notice under sub-paragraph (1) must—

(a) specify the company to which the notice relates;

(b) set out the reasons for which it appears to the officer that conditions A to E are met;

(c) state the effect of the notice;

(d) offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(e) explain the effect of paragraph 13 (right of appeal).

(9) It must also—

(a) specify the amount of the relevant tax liability, if the existence and amount of that liability have been established;

(b) if not, indicate that the amount will be specified in a further notice.

(10) Once the existence and amount of the relevant tax liability have been established in a case to which sub-paragraph (9)(b) applies, an authorised HMRC officer must give a further notice specifying that amount.

(11) A notice under sub-paragraph (10) must—

(a) be given to the individual to whom the notice under sub-paragraph (1) was given;

(b) offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(c) explain the effect of paragraph 13 (right of appeal).

(12) An individual who is given a notice under sub-paragraph (1) is jointly and severally liable with the company (and with any other individual who is given such a notice) for the relevant tax liability.

This is subject to paragraph 9 (interaction with penalties).

(13) The amount of the individual’s liability under sub-paragraph (12) is taken to be the amount specified under sub-paragraph (9)(a) or (10).

For provision under which the amount so specified may be varied, see—

(a) paragraph 10 (modification etc),

(b) paragraphs 11 and 12 (review), and

(c) paragraphs 13 and 14 (appeal).