HMRC have their own version of the naughty step: the published list of deliberate tax defaulters. The list was updated 12 September. Top of the class is a property management and import-exporter of food. The penalties charged amounted to a staggering £723,333.
Naming and shaming has been a part of law enforcement and punishment since records began. It will be interesting to see if the same philosophy is applied, in the fullness of time, to the extended powers to:
Proposals for sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are defeated by HMRC and to change the way the existing penalty regime works for those whose tax returns are found to be inaccurate as a result of using such arrangements.
[The above quote is copied from the consultation document “Strengthening Tax Avoidance Sanctions and Deterrents – closing dates for comments 12 October 2016]
The size of the penalties that enablers may be charged are listed in the consultation document as:
The size of the penalty needs to be proportionate to the services provided by the enabler and the financial reward they obtained. One approach could be to base the penalty on the financial or other benefit enjoyed by the enabler in providing their services as an enabler. A starting point could be 100% of that benefit, mitigated using criteria similar to those used to determine the level of penalty under Schedule 24 to the Finance Act 2007. However, it could be difficult to measure the actual benefit enjoyed.
An alternative would be to base a penalty on the amount of tax understated by the user to whom the enabler has provided those services, whether directly or indirectly, as a result of the avoidance being defeated. So, if a person has enabled 10 people to implement arrangements which are defeated, and each of those users has understated, say, £1,000, that enabler would be subject to 10 penalties, the starting point for which would be a percentage of the £1,000 each user has understated, i.e. £10,000 in total. If another person in the supply chain enabled only 6 of those users, with a third enabler providing services to the other 4, then the starting point for those enablers of avoidance would, in aggregate, be based on £6,000 and £4,000 respectively.