1.These sections and the related Schedules introduce new legislation applying to certain promoters of tax avoidance schemes. In broad outline, the provisions define promoters of avoidance schemes, identify when they have triggered “threshold” conditions targeting specified behaviours, and provide for a “conduct” notice to be applied to these promoters. Those who fail to comply with a conduct notice may be issued with a “monitoring” notice, which requires pre-approval by a Tribunal. Names of promoters subject to a monitoring notice will be published by HMRC, including details of how the conduct notice was breached, and the promoter will be required to publish its monitored status to clients. Information requirements will apply to monitored promoters, and intermediaries and clients of monitored promoters.
2.Section 234 is the first of a series of sections defining terms in the legislation. It defines the tax avoidance schemes classed as “relevant arrangements” and “relevant proposals” in relation to which a person may be a promoter. “Relevant arrangements” enable, or might be expected to enable, someone to obtain a tax advantage. Obtaining the tax advantage must be the main benefit or one of the main benefits of entering into the arrangements. “Tax advantage” is defined in subsection (3). “Arrangements” is widely defined to include agreements, schemes, arrangements and understanding, whether or not they are legally enforceable. “Relevant proposal” is a proposal for something which, if entered into, would be relevant arrangements and may relate to a single person or to a number of people.
3.Section 235 defines “promoter” in similar terms to sections 306 and 308 Finance Act 2004 (Disclosure of Tax Avoidance Schemes), but is not restricted to providers of tax or banking services. A person is a promoter only in respect of relevant proposals and relevant arrangements. Subsection (2) provides that a person is a promoter in respect of a relevant proposal if, at any time, the person is responsible for the design of the proposed arrangements, makes a “firm approach” to someone with a view to making the proposal available for implementation by that person or another, or makes the relevant proposal available for implementation by others. Subsection (3) of section 235 defines a promoter in relation to relevant arrangements as a person who at any time is a promoter for a relevant proposal which becomes the relevant arrangements, or is responsible for the design, organisation or management of the arrangements.
4.Subsections (4) and (5) of section 235 define “firm approach”. This is concerned with communicating information about the relevant proposal, at a stage when it has been “substantially designed” and includes an explanation of the expected tax advantage, to another person with a view to that person entering into the arrangements. Subsection (5) of section 235 explains when proposed arrangements have been “substantially designed”. This is when the transactions forming part of the proposed arrangements have been sufficiently developed, so that someone wanting to obtain the tax advantage could enter into those or similar transactions.
5.Subsections (6) and (7) contain a power to allow the definition of promoter to be amended to exclude persons from being a promoter in prescribed circumstances with retrospective effect. Regulations to exclude from the definition of promoter those providing advice on the commercial aspects of a proposal or arrangement are planned for later in 2014 with retrospective effect to Royal Assent.
6.Section 236 defines intermediary for the purposes of these provisions. There are three differences between the definition of promoter and intermediary. The first two are that the promoter definition includes the design of the proposed arrangements and making the relevant proposal available for implementation by others. The third difference is that a person who explains about the tax advantage is a promoter; an intermediary for the purposes of this legislation does not. Instead an intermediary is defined as a person who communicates information about the relevant proposal to another person with a view to that other person entering into the proposed arrangements. Anyone who does this is an intermediary unless they are also a promoter.
7.Section 237 describes the circumstances under which an authorised officer can issue a conduct notice and introduces Schedule 34 which includes the threshold conditions. A conduct notice can be issued if the promoter has, within the previous three years, triggered a threshold condition, and there is not an extant conduct notice or monitoring notice. The threshold conditions are described in the related Schedule. Subsections (2), (4) and (5) allow the authorised officer to ignore insignificant breaches of threshold conditions or cases where little tax is at risk. However a breach of a threshold condition cannot be considered “insignificant” if it is one of those listed in subsection (6).
8.Section 238 is concerned with the contents of the conduct notice. When a conduct notice is issued the recipient must comply with the conditions specified in the notice (subsection (1)). Subsection (2) allows the potential recipient an opportunity to comment on the proposed terms of the notice before it is issued. Subsection (3) lists the purposes for which issues can be included as conditions in the conduct notice. Each conduct notice will be tailored to the promoter. For example, if the promoter does not provide sufficient information about its proposals and arrangements to its clients there may be a condition in the conduct notice that it does so. If the promoter requires clients to enter into confidentiality agreements or contribute to a fighting fund while preventing them from settling their cases independently with HMRC, then a condition to address that may be included in the conduct notice.
9.Subsections (4) and (5) provide further explanation of the terms “adequate information” and “specified disclosure provision” in subsection (3). Subsection (6) enables a conduct notice to be issued to a promoter in a personal capacity or on a partnership. Subsection (8) includes a power to amend the definition of disclosure provisions for subsection (5) by regulation.
10.Section 239 provides definitions of “adequate”, “client” and “promotes”.
11.If a promoter abides by its conduct notice so that some conditions are no longer required or there is evidence that the underlying reason for the conduct notice has been addressed Section 240 allows an authorised officer of HMRC to amend or withdraw the conduct notice. Section 241 provides that the maximum length for a conduct notice is two years and provides that a conduct notice ceases to have effect once the promoter is subject to a monitoring notice.
12.If a promoter fails to comply with a conduct notice then section 242 requires the authorised officer to apply to the Tribunal for approval to give a monitoring notice. A monitoring notice can only be issued if approval is granted by the Tribunal. The promoter must be given notice of the application. If the breach of the conduct notice related to the provision of information to customers or intermediaries, or to the promoter’s duty to supply information to HMRC, is insignificant then the authorised officer is not under a duty to apply to the Tribunal for approval and consequently a monitoring notice is not issued (subsection (3)). The monitoring notice will state the reasons for its issue, in particular the condition in the conduct notice that the promoter breached. An effect of a monitoring notice is that the promoter may be subject to specific information notices with penalties for non-compliance.
13.Section 243 provides that the Tribunal may only approve a monitoring notice if it is satisfied that it is justified. The promoter has the opportunity to make representations to the Tribunal including representations about the reasonableness of the conditions in the conduct notice which HMRC considers it to have breached. The Tribunal may amend the proposed monitoring notice. Subsection (3) allows the monitored promoter to include in its representations to the Tribunal about the proposed monitoring notice its view that a condition in the conduct notice was unreasonable. If the Tribunal decides that a condition in the conduct notice is unreasonable subsections (3) and (4) operate so that the Tribunal will not approve the giving of a monitoring notice for a breach of only that condition. If the proposed monitoring notice identifies a breach of more than one condition of the conduct notice then the Tribunal will only refuse to approve the giving of a monitoring notice if it holds that all of the conditions were unreasonably imposed (assuming it is accepted that there was a breach on the facts and that the giving of the monitoring notice would be a justified response to that breach).
14.Section 244 describes the content of the monitoring notice and how it is issued. The monitoring notice is issue by an authorised officer of HMRC. All monitoring notices must explain the effect of the monitoring notice (including the date it takes effect) and the right of the recipient to request the withdrawal of the monitoring notice. In addition a monitoring notice being issued for the first time must include the condition or conditions of the conduct notice that it is has been determined that the promoter has breached. If them monitoring notice is a replacement monitoring notice then it must refer to the original monitoring notice. A promoter who is subject to a monitoring notice is referred to as a monitored promoter.
15.Section 245 provides the monitored promoter with the right to request that the monitoring notice should be withdrawn. For example the promoter may consider that it has complied with all of its obligations as a monitored promoter and has satisfied all the conditions of the preceding conduct notice, so that the monitoring notice is no longer necessary. Subsection (2) ensures that all the consequences of a monitoring notice runs for at least 12 months. An authorised officer has 30 days to respond to the request and when considering whether or not to reject the request, takes into account the behaviour of the promoter while it was being monitored (subsection (5)), the promoter’s likely future behaviour and its compliance with this Part. In addition the authorised officer can, when deciding to withdraw the notice, decide to issue a follow-on conduct notice so that the promoter continues to be subject to some supervision.
16.The notification of the authorised officer’s decision on withdrawal of the monitoring notice is made under section 246. The authorised officer may decide to accept or reject the request for withdrawal, but if they do the latter they must give their reasons. A right to appeal against a refusal to withdraw a monitoring notice is in section 247.
17.Section 248 allows an authorised officer to publish the fact that a person is a monitored promoter. Publication can include the promoter’s name, address, the nature of its business and other appropriate information, including the conditions in the conduct notice that were breached. A promoter’s details cannot be published until their right to appeal against the Tribunal’s approval has been exhausted (subsections (5) and (6)). Additionally if a monitoring notice is withdrawn it is incumbent on the authorised officer to publish the fact of the withdrawal in the same way.
18.Section 249 complements section 248 by requiring a promoter to publish to its clients that it is a monitored promoter and which of the conditions in the conduct notice have been breached. For existing clients the promoter must publish that it is monitored within 10 days of its right to appeal the Tribunal’s approval being exhausted (subsections (4) and (5)). For new clients the ten day period applies from the date that they became new clients (subsection (9)). HMRC may make regulations requiring a promoter to publish on the Internet or in other publications or correspondence, such as marketing material and communications with clients, that it is a monitored promoter, the conditions in the conduct notice that it has breached and its promoter reference number (subsections (3) and (10)). The form and manner of the publication is to be prescribed in regulations.
19.Section 250 requires HMRC to issue the monitored promoter with a promoter reference number. This can only be done after the promoter’s right to appeal against the Tribunal’s approval decision on an original monitoring notice is exhausted or if later the date that a replacement monitoring notice takes effect. The promoter reference number will enable HMRC to identify the monitored promoter’s clients so that its compliance efforts can be suitably directed. If the monitored promoter is offshore HMRC must issue the promoter reference number to intermediaries of the monitored promoter.
20.Within thirty days of receipt of the promoter reference number from HMRC, section 251 requires the promoter to pass on the promoter reference number to their clients and relevant intermediaries. If the monitoring notice is an original monitoring notice then the definition of clients also includes those who, from the date that the conduct notice took effect, have entered into transactions which enable or are likely to enable the person to obtain a tax advantage during the time that the monitoring notice has effect. There are two time limits for passing on the promoter reference number to the client depending on whether or not the client is a current client or a new client of the promoter. The time limit for providing the promoter reference number to relevant intermediaries is 30 days beginning with the later of the date that the promoter is notified by HMRC of the promoter reference number and the date that monitored promoter could reasonably be expected to know that the person was a relevant intermediary.
21.Section 252 requires clients of a promoter, within thirty days of receiving the promoter reference number, to pass on the promoter reference number to anyone who they know, or might reasonably be expected to know, is likely to be a client of the monitored promoter. This obligation also applies to intermediaries. This requirement will ensure that as many clients or people likely to be clients as possible are given the promoter reference number.
22.Section 253 requires the person notified of the promoter reference number to report the number to HMRC if they expect to obtain a tax advantage from the monitored promoter’s relevant arrangements. If the person makes a tax return then the promoter reference number should be included on the return. If the person does not make a tax return or the tax advantage arises in respect of stamp duty land tax, stamp duty reserve tax, inheritance tax or petroleum revenue tax then the promoter’s reference number should be notified to HMRC in the form and manner prescribed in regulations. Notification of the promoter reference number will enable HMRC to track taxpayers who have used the monitored promoter’s products and to target their compliance efforts accordingly.
23.Section 254 defines “monitored proposals” and “monitored arrangements” for the purposes of the information requirements that apply to monitored promoters. Monitored proposals and arrangements are those where certain actions take place after the date that the monitoring notice comes into effect. For example subsection (1) (a) defines monitored proposals as proposals for which the promoter makes a firm approach to another person after the date that the monitoring notice took effect. Subsection (2) defines monitored arrangements and includes arrangements which may have been entered into before the date that the monitoring notice takes effect but where the tax advantage generated arises on or after the date that the monitoring notice took effect (subsection (2) (c)).
24.Section 255 is the targeted information power for monitored promoters and relevant intermediaries. It is to be operated by, or with the approval of, authorised HMRC officers only and applies only if the information or documents are requested in writing. The information or documents requested must be reasonably required to meet certain purposes, specified in subsection (3), which includes considering the tax consequences of implementing a monitored proposal and to check the “tax position” of any person who is reasonably believed to have implemented monitored proposals or monitored arrangements. Only intermediaries who, having been notified of the promoter’s reference number, continue to communicate the promoter’s proposals are subject to the information requirement (subsection (4)). “Tax position” is widely defined in subsections (6) and (7). The time limit for providing the information or documents is a minimum of ten days but may be longer as directed by the officer giving the notice (subsection (10)).
25.If an HMRC officer wishes to use section 255 to obtain information which relates to a person other than a monitored promoter, their intermediary, or a subsidiary undertaking of either, section 256 requires the officer to obtain prior approval of the Tribunal. This is similar to paragraph 3 of Schedule 36 to Finance Act 2008.
26.Section 257 provides for the ongoing duty of the monitored promoter to provide information to HMRC. It takes effect once HMRC has notified the monitored promoter. This enables HMRC to obtain information about all monitored proposals and monitored arrangements that were in existence at the time the monitoring notice comes into effect and throughout the period that the promoter is monitored. Unlike DOTAS, which relies on identifying proposals or arrangements using hallmarks, this power is not limited to specific proposals or arrangements. The time limit for provision of the information and documents is variable and will be specified in the notification from HMRC. The information and documents to be provided under this duty will be detailed in secondary legislation.
27.If the monitored promoter is offshore and has failed to provide the information required under sections 255 and 257 about monitored proposals or monitored arrangements then HMRC may approach an intermediary to provide the information under section 258. In the absence of an intermediary then HMRC may require the person who has implemented the monitored proposal or all or part of the monitored arrangements to provide the information. The minimum period for the provision of the information is ten days.
28.Section 259 is concerned with the provision of information about the clients of the monitored promoter. HMRC may serve a notice under this section, after which time the monitored promoter has to make returns supplying names and addresses for its clients (as well as other prescribed information) on a calendar quarterly basis. The first return must contain details about current clients, and thereafter there is an on-going duty to file returns with details of new clients. The clients are those to whom the promoter has made a firm approach, made a relevant proposal available for implementation or those in relation to whom the promoter has taken part in the organisation or management of relevant arrangements. Clients that are entering into transactions for arrangements that the promoter has previously promoted are included in the information requirement if the tax advantage arises in a relevant period (subsection (8)). The information provided by the monitored promoter can be cross-checked against its client’s returns and notifications to HMRC for compliance purposes. Once the HMRC notice has been issued the duty to make returns continues until the promoter is no longer monitored.
29.Section 260 is the equivalent provision for intermediaries. HMRC may issue a notice to the intermediary requesting details of its clients in relation to a monitored proposal of the monitored promoter for a relevant period. The relevant period cannot begin before the intermediary received the promoter reference number (subsection (3)) and comes to an end once the monitoring notice ceases to have effect for that promoter. The intermediary has to provide the names and addresses (and other prescribed information) of the clients to whom it communicated information about the monitored proposal on an ongoing basis for each relevant period.
30.Section 261 only applies where a client return has been provided under section 259 or 260 and an authorised officer suspects that a person not included in the return is party to transactions implementing a proposal or arrangement. In these circumstances the officer can require the monitored promoter to provide prescribed information about that person. This will allow the officer to confirm or dismiss relevant suspicions. The minimum time for the provision of the information is ten days.
31.Section 262 applies to promoters who are subject to a conduct notice. The section allows HMRC to request information or documents that are reasonably required to enable HMRC to monitor the conduct notice. Any information or documents provided under section 262 may provide evidence to support the amendment or withdrawal of the conduct notice.
32.Section 263 places an obligation on the monitored promoter to inform an authorised officer of its current address within 30 days of the end of each calendar quarter for the period that the monitoring notice has effect.
33.If a promoter provides information under sections 255, or 257 to 262, but an authorised officer suspects that not all of the information or documents have been provided then section 264 enables the authorised officer to apply to the Tribunal for an order requiring the promoter to provide specified information or documents. The Tribunal needs to be satisfied that the authorised officer has reasonable grounds for suspecting that the information or documents are reasonably required or will support or explain information already required. The time limit for the provision of the information or documents is ten days or any longer period as the authorised officer directs.
34.Section 265 is equivalent to a similar DOTAS provision requiring a client to provide the promoter with their national insurance number and unique taxpayer reference. This will enable the promoter to provide this information to an authorised officer if required to do so under section 259 and will assist HMRC in tracking the promoter’s clients.
35.Appeal rights against the information notices are provided for in section 266. The time limit for an appeal is thirty days and the Tribunal can confirm or vary the notice or its requirement or set it aside.
36.Sections 267 to 271 are administrative provisions for the information notice sections 255 to 264. They are equivalent to similar provisions in Schedule 36 Finance Act 2008. Section 267 allows the Commissioners to specify the form and manner in which information and documents are to be provided. Section 268 allows the person who has received the notice to provide a copy of a document unless required to provide the original. Section 269 exempts certain documents from the information notice and section 270 limits the production of documents to those in the person’s possession or power and excludes certain old documents. Section 271 exempts from disclosure any privileged information. This is information subject to legal professional privilege, or for Scotland, confidentiality of communications.
37.Section 272 only applies to notices under section 258 – the duty of a person dealing with a monitored promoter outside the UK. It provides an exemption where the person to whom the authorised officer serves the information notice under section 258 is a tax adviser. The exemption applies to information and documents about or which are relevant communications between the tax adviser and its clients or another tax adviser of that client (subsections (2) and (5)).
38.Section 273 enables clients and intermediaries to ignore a non-disclosure agreement they have with the monitored promoter if they want to provide information or documents to HMRC. The information can be about the monitored promoter itself or its relevant proposals and relevant arrangements. The information is not restricted to proposals and arrangements that the client or intermediary has used or communicated about; it can be information about other proposals or arrangements of the monitored promoter.
39.Section 274 introduces Schedule 35 which contains provisions about the penalties for this Part.
40.Section 275 introduces a higher standard of reasonable excuse and reasonable care for monitored promoters and their clients for certain obligations under the Disclosure of Tax Avoidance Schemes (DOTAS) rules. A reasonable excuse for failing to comply with an obligation under the Taxes Acts can be, for example an unforeseen event or illness that prevents the person from meeting that obligation. What constitutes reasonable excuse in any particular case depends on the specific facts of that case. Sometimes a person will obtain professional advice about whether or not they are required to meet that obligation. They may then want to rely on the existence of that advice to argue that they have a reasonable excuse for not meeting it. Whether or not this advice is sufficient to provide a reasonable excuse will depend on such factors as the competency of the adviser and the relevance of the advice to the facts. There is a requirement to take reasonable care when submitting returns and other information to HMRC. What is reasonable care for a person will vary according to the circumstances of the case; again someone may argue that they have taken reasonable care because they have obtained professional advice. There is detailed guidance on reasonable excuse and reasonable care in HMRC’s Compliance Handbook.
41.The higher standard of reasonable excuse and reasonable care for clients in these sections ensures that the client cannot rely on legal advice provided to them by the monitored promoter in order to claim that they had a reasonable excuse or took reasonable care. This does not meant that the person cannot have a reasonable excuse at all, there may be other circumstances or they may have obtained independent legal advice that will allow HMRC or the Tribunal to consider if they have a reasonable excuse.
42.The higher standard of reasonable excuse and reasonable care for promoters is different. The higher standard is based on the relevance of the legal advice and it ensures that the monitored promoter cannot rely on legal advice for the defences of reasonable excuse and reasonable care if the advice was not based on a full and accurate description of the facts or if the conclusions in the advice were unreasonable.
43.Section 275 introduces the higher standard for reasonable excuse for a client by inserting new subsection (2EA) into section 98C Taxes Management Act 1970 (the DOTAS penalty provisions). It applies where the client of an offshore promoter has failed to comply with their obligation to provide information about notifiable arrangements either under section 309 or 310 Finance Act 2004. If the client wishes to argue that they have a reasonable excuse under section 118 Taxes Management Act 1970 then they cannot rely on legal advice given to them or obtained by the monitored promoter.
44.New subsection (2EB) introduces the higher standard of reasonable excuse for a monitored promoter’s DOTAS obligations. For example this applies to the monitored promoter’s duty to notify proposals and arrangements under DOTAS, to provide clients with scheme reference numbers and to provide details of clients. Section 276 introduces the higher standard of reasonable care for clients’ tax returns and accounts (as listed in paragraph 1 of Schedule 24 Finance Act 2007). The higher standard is as described in paragraph 41 above and ensures that the client cannot rely on legal advice provided to them by the monitored promoter in order to claim that they had a reasonable excuse or took reasonable care.
45.Where tax is lost due to the client’s failure to notify HMRC of the monitored promoter’s reference number section 277 provides for an extended time limit of 20 years for raising assessments in respect of income tax, capital gains tax, corporation tax, inheritance tax, petroleum revenue tax, stamp duty land tax, and the annual tax on enveloped dwellings.
46.Sections 278 to 280 mirror the provisions in Part 8 Schedule 36 Finance Act 2008 for offences in relations to information notices. Section 278 applies if a person conceals, destroys or disposes of or arranges for the concealment, destruction or disposal of a document that is subject to an information notice under section 255. Section 279 contains a similar provision where the person has been informed by HMRC that they are likely to be given an information notice under section 255 and HMRC is going to apply to the Tribunal for permission to issue the information notice. Section 280 provides that the penalties for such offences are a fine or imprisonment for a maximum of two years or both.
47.Section 281 introduces Schedule 36 which contains provisions for partnerships.
48.Section 282 allows regulations to be made for the purposes of the legislation. Apart from statutory instruments to make regulations to add new disclosure provisions, threshold conditions, to change the amount of a penalty or the definition of control which are made under the affirmative procedure, all other regulations are made under the negative procedure. Finally section 283 provides a number of definitions to support the sections.
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.
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.
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).
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.
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.
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.
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.
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.
96.This legislation is designed to tackle the particular behaviours which have been identified amongst certain promoters of tax avoidance schemes (e.g. failure to comply with DOTAS or respond to HMRC information notices) and in doing so improve the transparency of certain promoters with HMRC with appropriate sanctions if the promoter does not want to comply voluntarily.