UK HMRC has published guidance dated 11 April 2022 on the new penalty for UK-based entities facilitating avoidance schemes involving non-resident promoters. Rules for the new penalty were introduced as part of the Finance Act 2022 with effect from 24 February 2022, which is the date the Act received royal assent.

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Overview

This guidance is based on legislation contained in Finance Act 2022 which introduces a new penalty applicable to UK-based entities who facilitate tax avoidance schemes involving non-resident promoters. The penalty can be for an amount up to 100% of the total fees, or the amounts which are the economic equivalent of fees, received by all entities involved in the promotion of that avoidance scheme. This would include fees paid directly to the non-resident promoter, together with fees paid to any other entities or persons who form part of the promotion structure for the scheme.

It is more difficult for HMRC to investigate avoidance involving offshore promoters and to challenge the behaviours of the persons involved because complex offshore enquiries take much longer and require far more resource than equivalent UK cases.

Schemes involving offshore promoters continue to be marketed and facilitated through a network of willing UK associates. Without the support provided by these UK entities who promote and market schemes and enrol customers to use them, the offshore promoter would not have vital access to the UK market. The new penalty seeks to make it more difficult for non-resident promoters to sell such schemes in the UK, by no longer making it economically viable for UK entities to facilitate the activities of non-resident promoters.