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ICAEW Tax Faculty calls for safeguards for directors of tax avoidance schemes

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ICAEW’s Tax Faculty is proposing safeguards for directors of alleged tax avoidance schemes in response to HMRC’s latest proposals that would allow a criminal offence to be applied where promoters fail to comply with a stop notice and directors are disqualified

The ICAEW explains in a recent Insights report that failure to comply with the obligations imposed by a stop notice can currently lead to” substantial civil penalties”. Due to some promoters continuing to promote schemes despite a stop notice being issued, HMRC is now consulting on the introduction of a criminal offence for failure to comply with a stop notice. 

In its response to the HMRC’s consultation, ICAEW’s Tax Faculty expressed a concern that persons could be found guilty of the proposed criminal offence even where the stop notice is subsequently overturned. It, therefore, has suggested a safeguard designed to prevent this outcome.

“While a criminal offence case could be referred to the crown prosecution service when the person doesn’t comply with the stop notice, if the person wins their appeal against the notice, the safeguard would be that the criminal case would not be taken to court,” the ICAEW suggests.

The faculty also suggested: 

  • having stop notices being issued at a higher level of seniority within HMRC than at present; and
  • introducing a sunset clause for the criminal offence measure, such that its effectiveness and necessity must be assessed in the future. It could also be the subject of independent parliamentary scrutiny after several years. 

The ICAEW reported that the same consultation document included a proposal that individuals who control or exercise influence over a company involved in the promotion of tax avoidance could be disqualified from being a director of this or any other current or future company. The faculty’s response suggests that a safeguard should be introduced to prevent directors from being disqualified where they can demonstrate: 

  • that they had no knowledge of the promoter activities of the company concerned; and
  • that they have not been appointed to conceal the identity of individuals instrumental in promoting these activities who were acting as ‘shadow directors’. 
1 Comment
  1. John Wilson says

    In my view, ICAEW are making themselves look complicit in these shenanigans. I’m speaking as someone who made the mistake of getting entangled in such a scheme years back, and ended up paying a significant penalty to resolve the consequent tax issues. My perspective from my own experience is: 1) I really don’t believe that directors of these schemes are oblivious to their dubious nature, especially now with all the publicity that has gone on. 2) As various issues were raised with schemes, they changed and adapted, but kept members “on the hook” by promising to supply full legal support in any dispute if members stayed with them (and of course they didn’t). 3) The scheme I was a member of, was IoM based. The account manager I dealt with, who decided to leave, told me the director was “a very important person” on IoM who “no one would want to get into trouble with” (It sounded quite ominous). So I do not buy for one minute, the apparent innocence of these directors as claimed by ICAEW, and my impression of them is now in the gutter….

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