The UK government announced a package of new measures aimed at strengthening penalties for promoters of tax avoidance schemes. The measures are targeted at the most persistent and determined promoters of tax avoidance.

There are two measures within this package. The first creates a new criminal offence and will affect promoters of tax avoidance schemes who continue to promote avoidance schemes after receiving a ‘Stop Notice’ requiring them to stop promoting schemes described in that notice.

A stop notice is part of the POTAS (Promoters of Tax Avoidance Schemes) regime and is a legally enforceable notice given to any person suspected of promoting tax avoidance schemes where certain conditions are met.

Conviction would result in an unlimited fine as well as a potential prison term of up to two years. This criminal offence would sit alongside the existing civil sanctions that apply to recipients of a stop notice.

The second measure creates a new power enabling the HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company.

In a statement, the government said, “The measures are designed to build on and complement anti-avoidance measures introduced in Finance Acts 2021 and 2022. They will strengthen existing deterrents and make it riskier for promoters to continue promoting their tax avoidance schemes.”

The legislation would also apply to those promoting tax avoidance in the UK via companies held overseas and also apply retrospectively, meaning promoters of tax avoidance who have already received a ‘stop notice’ would be impacted by the proposed law.

At Spring Budget 2023, the government first announced a consultation on the new criminal offence and director disqualification measures. A consultation was launched on 27 April 2023, and closed on 22 June 2023.

Julia Kermode, CEO of umbrella company compliance specialist, PayePass, said, “These immoral schemes have left tens of thousands of innocent people with staggering tax bills, so anything that stops the trail of devastation they cause is welcome – albeit long overdue. The sooner it becomes law and those guilty of promoting tax avoidance face unlimited fines and jail time, the better.”