SCHEDULE 24Penalties for errors
Part 1Liability for penalty
F1Errors related to avoidance arrangements
3A
(1)
This paragraph applies where a document of a kind listed in the Table in paragraph 1 is given to HMRC by a person (“P”) and the document contains an inaccuracy which—
(a)
falls within paragraph 1(2), and
(b)
arises because the document is submitted on the basis that particular avoidance arrangements (within the meaning of paragraph 3B) had an effect which in fact they did not have.
(2)
It is to be presumed that the inaccuracy was careless, within the meaning of paragraph 3, unless—
(a)
the inaccuracy was deliberate on P's part, or
(b)
P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that P took reasonable care to avoid inaccuracy.
(3)
In considering whether P took reasonable care to avoid inaccuracy, HMRC and (on an appeal notified to the tribunal) the tribunal must take no account of any evidence of any reliance by P on advice where the advice is disqualified.
(4)
Advice is “disqualified” if any of the following applies—
(a)
the advice was given to P by an interested person;
(b)
the advice was given to P as a result of arrangements made between an interested person and the person who gave the advice;
(c)
the person who gave the advice did not have appropriate expertise for giving the advice;
(d)
the advice took no account of P's individual circumstances;
(e)
the advice was addressed to, or given to, a person other than P;
but this is subject to sub-paragraphs (5) and (7).
(5)
Where (but for this sub-paragraph) advice would be disqualified under any of paragraphs (a) to (c) of sub-paragraph (4), the advice is not disqualified under that paragraph if at the relevant time P—
(a)
has taken reasonable steps to find out whether the advice falls within that paragraph, and
(b)
reasonably believes that it does not.
(6)
In sub-paragraph (4) “an interested person” means—
(a)
a person, other than P, who participated in the avoidance arrangements or any transaction forming part of them, or
(b)
a person who for any consideration (whether or not in money) facilitated P's entering into the avoidance arrangements.
(7)
Where (but for this sub-paragraph) advice would be disqualified under paragraph (a) of sub-paragraph (4) because it was given by a person within sub-paragraph (6)(b), the advice is not disqualified under that paragraph if—
(a)
the person giving the advice had appropriate expertise for giving it,
(b)
the advice took account of P's individual circumstances, and
(c)
at the time when the question whether the advice is disqualified arises—
(i)
Condition E in paragraph 3B(5) is met in relation to the avoidance arrangements, but
(ii)
none of Conditions A to D in paragraph 3B(5) is or has at any time been met in relation to them.
(8)
If the document mentioned in sub-paragraph (1) is given to HMRC by P as a personal representative of a deceased person (“D”)—
(a)
sub-paragraph (4) is to be read as if—
(i)
the references in paragraphs (a) and (b) to P were to P or D;
(ii)
the reference in paragraph (d) to P were to D, and
(iii)
the reference in paragraph (e) to a person other than P were to a person who is neither P nor D,
(b)
sub-paragraph (6) is to be read as if—
(i)
the reference in paragraph (a) to P were a reference to the person to whom the advice was given, and
(ii)
the reference in paragraph (b) to P were to D (or, where P also participated in the avoidance arrangements, P or D), and
(c)
sub-paragraph (7) is to be read as if the reference in paragraph (b) to P were to D.
(9)
In this paragraph—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“the relevant time” means the time when the document mentioned in sub-paragraph (1) is given to HMRC;
“the tribunal” has the same meaning as in paragraph 17 (see paragraph 17(5A)).
3B
(1)
In paragraph 3A “avoidance arrangements” means, subject to sub-paragraph (3), arrangements which fall within sub-paragraph (2).
(2)
Arrangements fall within this sub-paragraph if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.
(3)
Arrangements are not avoidance arrangements for the purposes of paragraph 3A if (although they fall within sub-paragraph (2))—
(a)
they are arrangements which accord with established practice, and
(b)
HMRC had, at the time the arrangements were entered into, indicated its acceptance of that practice.
(4)
If, at any time, any of Conditions A to E is met in relation to particular arrangements—
(a)
for the purposes of this Schedule the arrangements are to be taken to fall within (and always to have fallen within) sub-paragraph (2), and
(b)
in relation to the arrangements, sub-paragraph (3) (and the reference to it in sub-paragraph (1)) are to be treated as omitted.
This does not prevent arrangements from falling within sub-paragraph (2) other than by reason of one or more of Conditions A to E being met.
(5)
Conditions A to E are as follows—
(a)
Condition A is that the arrangements are DOTAS arrangements within the meaning given by section 219(5) and (6) of FA 2014;
(b)
Condition B is that the arrangements are disclosable VAT arrangements or disclosable indirect tax arrangements for the purposes of Schedule 18 to FA 2016 (see paragraphs 8A to 9A of that Schedule);
(c)
Condition C is that both of the following apply—
(i)
P has been given a notice under a provision mentioned in sub-paragraph (6) stating that a tax advantage arising from the arrangements is to be counteracted, and
(ii)
that tax advantage has been counteracted under section 209 of FA 2013;
(d)
Condition D is that a follower notice under section 204 of FA 2014 has been given to P by reference to the arrangements (and not withdrawn) and—
(i)
the necessary corrective action for the purposes of section 208 of FA 2014 has been taken in respect of the denied advantage, or
(ii)
the denied advantage has been counteracted otherwise than as mentioned in sub-paragraph (i);
(e)
Condition E is that a tax advantage asserted by reference to the arrangements has been counteracted (by an assessment, an amendment of a return or claim, or otherwise) on the basis that an avoidance-related rule applies in relation to P's affairs.
(6)
The provisions referred to in sub-paragraph (5)(c)(i) are—
(a)
paragraph 12 of Schedule 43 to FA 2013 (general anti-abuse rule: notice of final decision);
(b)
paragraph 8 or 9 of Schedule 43A to that Act (pooled or bound arrangements: notice of final decision);
(c)
paragraph 8 of Schedule 43B to that Act (generic referrals: notice of final decision).
(7)
In sub-paragraph (5)(d) the reference to giving a follower notice to P includes giving a partnership follower notice in respect of a partnership return in relation to which P is a relevant partner; and for the purposes of this sub-paragraph—
(a)
“relevant partner” has the meaning given by paragraph 2(5) of Schedule 31 to FA 2014;
(b)
a partnership follower notice is given “in respect of” the partnership return mentioned in paragraph 2(2)(a) or (b) of that Schedule.
(8)
For the purposes of sub-paragraph (5)(d) it does not matter whether the denied advantage has been dealt with—
(a)
wholly as mentioned in one or other of sub-paragraphs (i) and (ii) of sub-paragraph (5)(d), or
(b)
partly as mentioned in one of those sub-paragraphs and partly as mentioned in the other;
and “the denied advantage” has the same meaning as in Chapter 2 of Part 4 of FA 2014 (see section 208(3) of and paragraph 4(3) of Schedule 31 to that Act).
(9)
For the purposes of sub-paragraph (5)(e) a tax advantage has been “asserted by reference to” the arrangements if a return, claim or appeal has been made by P on the basis that the tax advantage results from the arrangements.
(10)
In this paragraph—
“arrangements” has the same meaning as in paragraph 3A;
“avoidance-related rule” has the same meaning as in Part 4 of Schedule 18 to FA 2016 (see paragraph 25 of that Schedule);
a “tax advantage” includes—
(a)
relief or increased relief from tax,
(b)
repayment or increased repayment of tax,
(c)
avoidance or reduction of a charge to tax or an assessment to tax,
(d)
avoidance of a possible assessment to tax,
(e)
deferral of a payment of tax or advancement of a repayment of tax,
(f)
avoidance of an obligation to deduct or account for tax, and
(g)
in relation to VAT, anything which is a tax advantage for the purposes of Schedule 18 to FA 2016 under paragraph 5 of that Schedule.