New proposals for tackling promoters and enablers of tax avoidance schemes

The measure proposes a series of legislative changes to existing anti-avoidance regimes to strengthen HMRC’s ability to further clamp down on the market for tax avoidance.

The proposals include:

  • making sure HMRC can more effectively issue stop notices to promoters, under the Promoters of Tax Avoidance Scheme (POTAS) rules, to make it harder to promote schemes that do not work
  • preventing promoters from abusing corporate entity structures to avoid their obligations under the POTAS rules
  • making sure HMRC can get information about the enabling of abusive schemes (for the purposes of the Enablers Penalty Regime) as soon as they are identified and making sure enabler penalties are felt without delay when a scheme has been defeated at tribunal
  • making sure that HMRC can act quickly and decisively where promoters fail to provide information on their avoidance schemes under the Disclosure of Tax Avoidance Schemes (DOTAS)
  • making more technical amendments to the POTAS regime so that it continues to operate effectively and to make sure that the General Anti Abuse Rule (GAAR) can be used to counteract partnerships as intended

Policy objective

The proposals are designed to strengthen the existing anti-avoidance regimes, which provide a mechanism for ensuring there is transparency for taxpayers and others around avoidance schemes, and to change the behaviours of those involved in promoting and enabling schemes. Under the DOTAS regime, promoters of avoidance schemes must give HMRC information about the schemes they are promoting and who their clients are.

The POTAS rules are aimed at changing the behaviour of promoters of avoidance schemes and to deter the development and use of avoidance schemes by monitoring the activities of those who repeatedly sell schemes which fail.

The aim of the enablers legislation is to influence and promote behavioural change in the minority of tax agents, intermediaries and others who design, market or facilitate the use of abusive avoidance schemes. The primary objective of the GAAR is to deter taxpayers from entering into abusive arrangements and to deter would be promoters from promoting such arrangements.

HMRC are aware that promoters (and others in the avoidance supply chain) are increasingly failing to comply with their obligations voluntarily and are using every available opportunity to delay, obstruct or sidestep HMRC compliance activity while they continue to sell their schemes.

The government is committed to tackling promoters and enablers of tax avoidance schemes and will take action to tighten up the avoidance regimes described above to make sure they work as intended.

Background to the measure

The government announced at Budget 2020 their plans to legislate at Finance Bill 2020-21 to take further action against those who promote and market tax avoidance schemes. The package of measures proposed is also a key part of the approach set out in the government’s promoters’ strategy ‘Tackling promoters of mass-marketed avoidance schemes’, published on 19 March 2020.

HMRC has today published a consultation document alongside the draft legislation. The document provides additional detail about the proposals and invites interested parties to respond to the consultation by 15 September 2020.

Operative date

The changes announced at Budget 2020 would be operative as follows:

  • Changes to the POTAS rules: For stop notices, under the POTAS regime, the new legislation would apply to all schemes promoted on or after the date of Royal Assent of the Finance Bill 2020-2021. It would also apply to schemes which are being promoted before Royal Assent but continue to be promoted on or after Royal Assent. The other changes to POTAS would similarly come into effect on or after the date of Royal Assent.
  • Enablers: The proposed changes to the information powers would apply to all current and future investigations into potential enablers. The proposed changes to when HMRC would be able to issue penalties to enablers would apply in relation to schemes enabled and defeated after Royal Assent. The proposed change to publishing information about enablers would apply to penalties raised after Royal Assent to this legislation, where the enabling and defeat also occurred after Royal Assent to this legislation.
  • DOTAS: The legislation for the new DOTAS information requirement would apply to any scheme first promoted on or after Royal Assent or any scheme which was first promoted before that date but is still being promoted on or after Royal Assent.
  • Changes to the GAAR: The amendments to the GAAR would come into effect in relation to any GAAR notices issued to partnerships on or after Royal Assent.

Current law


The purpose of the POTAS regime is to change the behaviour of promoters of avoidance schemes and to deter the development and use of avoidance schemes by influencing the behaviour of promoters, intermediaries and their clients. Current law is contained in Part 5 and Schedules 34 to 36 to Finance Act (FA) 2014 (as amended).

The stop notice legislation is in Paragraph 12, Schedule 34 to FA2014. A stop notice can only be issued to a person who promotes a scheme that has been subject to at least one follower notice. Follower notices are issued by HMRC to users of schemes which have already been defeated in another person’s litigation, with no prospect of further appeal.

If a promoter does not comply with a stop notice they would meet a POTAS threshold condition which may lead to HMRC giving them a conduct notice under section 237/237A FA2014. A conduct notice imposes conditions on the promoter which require it to change its behaviour and can lead to a monitoring notice and potentially stronger sanctions such as the publication of information about the promoter and an ongoing requirement to provide HMRC information relating to avoidance schemes they are promoting.

In certain circumstances, a person can be treated as having met a POTAS threshold condition that was met by another person. This treatment allows an HMRC Authorised Officer to consider giving that person a conduct notice. The rules for attributing the meeting of a threshold condition are set out in Part 2, Schedule 34 to FA2014.

If a promoter transfers their promoting activities to a connected company, that connected company as a separate entity cannot be given a stop notice as it was not the original promoter of the defeated scheme. If the first company no longer continued to promote the scheme it would not meet the threshold condition as they had not breached the requirements of the stop notice. This means that neither entity could be issued with a stop notice and the scheme can continue to be sold through the new entity.

The definition of a promoter is contained in Section 235 FA2014. Promoters are able to artificially separate out their promoting activities so that no single entity meets the current description of a promoter, even if collectively all entities would do so by virtue of playing roles which are vital to the design, marketing, organisation or management of a scheme.

The POTAS attribution rules as they stand do not hold the individual directly accountable for the actions of the entities over which they have control or significant influence. This means that individuals are able to manipulate entities, setting them up and collapsing them at will.

2 year period for conduct notices.

Section 241 FA 2014 sets out the duration of a conduct notice. HMRC’s scrutiny of the behaviour outlined in a conduct notice can last no longer than 2 years. No action can be taken once the notice has expired.

Conduct notice threshold condition.

Sections 237 and 237A FA 2014 set out the circumstances in which a conduct notice is to be issued. Currently not all failures under DOTAS bring the promoter under the POTAS regime. For example, where a promoter fails to disclose a scheme under DOTAS, but a Tribunal has determined that it was disclosable; or where a promoter fails to comply with a DOTAS information notice.

Enablers penalties

The penalty for enablers of defeated tax avoidance were introduced by Schedule 16 Finance (No.2) Act 2017.

The penalty regime for enablers of abusive tax avoidance aims to promote behavioural change in tax agents, intermediaries and others who design, market or facilitate the use of abusive avoidance arrangements, in the course of their business. Where these arrangements are later defeated (in court or at the tribunal, or are otherwise counteracted, for example through a settlement or adjustment to a return), the intention behind the rules is to hold enablers accountable for their activities. However, progress in tackling enablers of marketed tax avoidance arrangements (such as multi-user schemes) is being frustrated by the:

  • inability to enquire at an early stage into the enabling of the schemes
  • need for more than 50% of the relevant uses to have been defeated before HMRC can assess penalties (Paragraph 21 of Schedule 16 Finance Act (No.2) Act 2017)

Part 10 of schedule 16 Finance Act (No.2) 2017 provides that HMRC may also publish information about a person (the enablers name and address and the number of penalties and their value) when, in the last 12 months, 50 or more penalties have been incurred or the total value of penalties incurred is more than £25,000. However, for multi-user schemes HMRC cannot name an individual unless and until all uses of that scheme have been defeated. For example, in the case of a scheme with 200 arrangements, where there have been 60 defeats and penalties have been issued for each of those, HMRC cannot name under this provision until all 200 have been defeated:


The DOTAS regime is legislated by Part 7 of FA 2004 (as amended). DOTAS is an information regime that aims to obtain early information about tax arrangements, how they work and who has used them. It creates obligations on promoters of tax avoidance to disclose details of the tax avoidance schemes they are promoting and then further obliges them in prescribed situations to inform would be users of their schemes of a reference number provided to them by HMRC. Where they do not comply with those obligations the DOTAS regime provides both penalties for such failures and information powers for HMRC to seek information from those promoters.

Promoters are increasingly failing to voluntarily meet their obligations to disclose tax avoidance schemes, requiring HMRC to take action to force disclosure. Promoters are responding by, for example, restructuring their businesses in the face of challenge, engaging in protracted circular correspondence and simply denying they are a promoter when evidence suggests otherwise. This results in formal action taken by HMRC being unduly extended.

During these protracted delays there is no effective bar to the promoter continuing to sell people avoidance schemes that in many cases are destined to fail.


Current law is contained in Part 5 Finance Act 2013 (FA 2013) (as amended by sections 155, 156 and 157 Finance Act 2016).

The GAAR was introduced in 2013 and provides HMRC with the ability to challenge ‘abusive’ tax arrangements where those arrangements are designed to achieve a tax outcome clearly outside the intention of the legislation. Abusive tax arrangements are arrangements entered into or carried out which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances.

The GAAR legislation only applies to the person who received the tax advantage. This causes difficulties when considering a partnership case. Usually HMRC enquiries will be made into the partnership return. The final profit or loss figure would be agreed with the partnership and individual partners would then be informed of the relevant adjustments required to their personal tax returns. However, the GAAR lacks a clear mechanism to enable HMRC to issue separate GAAR notices to partnerships or to individual partners in such a way that each partner can be made responsible for their share of any partnership liability.

Proposed revisions


Earlier stop notices.

This proposed changes to POTAS would amend the existing stop notices powers so that they can be issued to promoters earlier to stop the sale of schemes that are not going to give the tax advantage the promoter has promised before the scheme has been defeated.

Under the proposals, the changes would provide that a stop notice can be issued for new schemes where HMRC has reason to suspect that (i) a person is a promoter, (ii) that the promoter is promoting arrangements where at least one of the benefits is a tax advantage, and (iii) that HMRC has reasonable grounds to suspect do not deliver the tax advantage promised.

Under the proposals, the changes would also provide that a stop notice can be issued for new schemes where both (i) HMRC has reason to suspect that a person is a promoter and that promoter is promoting arrangements where at least one of the benefits is a tax advantage, and (ii) the promoter meets a number of conditions which include the promoter meeting any one of the following criteria, namely that the promoter:

  • has previously been found to have breached the POTAS regime
  • promotes schemes that are caught by the loan charge (see here, schedule 11 Finance (No 2) Act 2017) or are caught by Part 7A Income Tax (Earnings and Pensions) Act 2003 or sections 23A-H Income Tax (Trading and Other Income) Act 2005 for schemes where there are loans made on or after 6 April 2017
  • is issued with a scheme reference number in relation to any scheme under DOTAS, including under the new proposed changes to DOTAS

This would make sure that (a) HMRC are able to intervene earlier in the promotion of such schemes, stopping the marketing of the schemes, so that taxpayers are prevented from entering into schemes that do not work and (b) the consequences of selling schemes if the stop notice is not complied with would be accelerated.

Under the proposals, where a stop notice is issued, the names of the promoters, the details of the scheme and the reasons for the stop notice would be published under the proposed legislation but only after a decision has been reached by the First-tier Tribunal (if there is an appeal against the notice being issued) or after that appeal is withdrawn. This is to make sure that taxpayers are aware of which promoters are high risk and to discourage them from entering into any tax avoidance scheme that promoter promotes.

Removing the ability of high-risk promoters to hide behind corporate or other entities.

The proposed legislation is aimed at promoters that carry out their activities through different entities or incorporations in order to sidestep the rules. The proposals would place responsibility for the obligations within POTAS and for any failure to comply with them on the people behind such manipulative behaviour. Persons who operate in the UK and act under the guidance or influence of an offshore promoter would be classified as meeting the definition of carrying on a business as a promoter. This includes where there is a branch or permanent establishment of a UK non-resident promoter.

Where a person with significant influence or control sets up a new entity into which they transfer their promoting activities, HMRC would be able to attribute threshold conditions, conduct notices, and monitoring notices to them where HMRC have reason to believe that the new entity is a promoter.

The changes would make sure that HMRC is able to more effectively challenge persons who use separate legal personalities to avoid their legal obligations. The aim of these changes is to tackle the person ultimately responsible for the promotion of schemes as well as entities they control or have significant influence over. They are not aimed at ordinary compliant tax advisors.

Tightening the application of the 2 year period for conduct notices.

The legislation would bring about the following changes:

  • the time taken for any litigation challenge would be factored into the life of the conduct notice (so that its effect is actually realised for the full period)
  • HMRC would still be able to go to the tribunal for a monitoring notice after a conduct notice has ended where it is discovered that a breach was during the period the notice was live
  • the length of conduct notices would be extended up to a maximum of 5 years to take account of more significant threshold conditions being met and the number of threshold conditions met
  • HMRC would be able to transfer the requirements of conduct or monitoring notices to any entities used by the promoter in the promotion of schemes

Conduct notice threshold condition amendments.

The new POTAS legislation would update the DOTAS threshold condition in Paragraph 5, Schedule 34 to FA2014 to include disclosure failures of any nature. It would also update the information powers threshold condition in Paragraph 10, Schedule 34 to FA2014 so that DOTAS and other disclosure regimes information powers are included. This is to make sure that the high-risk promoters HMRC is aiming to tackle are correctly brought into the POTAS regime.

Other minor technical amendments.

The legislation also contains other technical amendments that would make sure the efficiency of the POTAS regime such as allowing HMRC the ability to withdraw and reissue conduct notices.

Enablers penalties

The proposals changes to the legislation in Finance (No. 2) Act 2017 would be as follows:

  • information powers – the new legislation would allow HMRC to use Schedule 36 information powers in much the same way as it would when enquiring into an ordinary tax return as the changes would allow HMRC to get the information it needs in order to check whether a person is or may become liable to a penalty – the changes would allow HMRC to use the information power on promoters whilst the enquiry into the taxpayers use of a scheme is underway
  • provision about assessment for multi-user schemes – the proposals here would see the introduction of a new tiered approach to determining when HMRC can issue penalties to an enabler
  • naming enablers – the revised legislation would enable HMRC to publish the enabler’s name and address, the number of penalties incurred and their value much sooner where multi user schemes are involved – this would not affect the threshold conditions of 50 or more reckonable penalties incurred in the previous 12 months, or the total value of penalties incurred is more than £25,000 in the previous 12 months


The amended legislation provides for a 2-stage process that would sit within the existing DOTAS regime.

The first stage creates a new information notice that can be issued to a wider range of promoters and intermediaries in the avoidance supply chain than is currently possible – this notice would require the recipient to supply HMRC with the information it needs in order to ascertain whether an avoidance scheme is being promoted that has not been disclosed to HMRC under the DOTAS regime. If the information is forthcoming HMRC would be able to use that information as normal within the DOTAS regime.

The second stage is triggered if the information is not forthcoming or insufficient and would enable HMRC to issue a DOTAS Scheme Reference Number (SRN). This would help bring a scheme into the DOTAS regime quicker and allow HMRC to take remedial action faster where avoidance schemes are being promoted.

The draft legislation also includes provisions that would allow HMRC to publish information from these notices along with the SRN to make sure that taxpayers are sufficiently informed on HMRC’s interest in the scheme.

These changes would also be applied to the Disclosure of Avoidance Schemes: VAT and other indirect taxes regime.

GAAR Partnership changes

The proposals here would see amendments made to the existing legislation to make provision for the GAAR procedural requirements to be applied to partners or partnerships who enter into abusive arrangements.

The proposals would provide an express mechanism in the GAAR legislative framework to allow HMRC to deploy the GAAR at partnership level, with counteraction taking place via the partnership statement and then carried through to each relevant partner.

The proposals would mean that GAAR notices could be issued to the representative partner in a partnership, mirroring the way partnership enquiries are conducted under the Income Tax Self-Assessment regime.

If you have any questions about this change, email: [email protected]