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Promoters of tax avoidance schemes (POTAS) or a tax adviser?

By Laurence Vogel

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If you are concerned that you may be involved in the promotion of tax avoidance schemes, in particular that you may be subject to the Promoters of Tax Avoidance Schemes (POTAS) legislation, HMRC have recently updated their guidance on this topic at

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/454865/POTAS.pdf

The document runs to 114 pages and reading the content is not for the faint hearted.

Who would be considered a promoter? The statutory definition is contained in section 235 of the Finance act 2014:

Section 235
(1)A person carrying on a business in the course of which the person is, or has been, a promoter in relation to a relevant proposal or relevant arrangements carries on that business “as a promoter”.
If you want to view the entire section go to

http://www.legislation.gov.uk/ukpga/2014/26/section/235/enacted

This definition seems unlikely to include practitioners who advise clients to make the most of existing legislation, although most anti-avoidance legislation seeks to target promoters, and therefore advisors, who seek to advise based on an interpretation of tax legislation that was not intended by parliament.

Which, of course, is where the real issue regarding tax compliance is likely to focus in the future, when is an arrangement contrary to the intentions of parliament?

The present adversarial process, where promoters advise, practitioners support and clients are signed up to specialist schemes, only to be challenged by HMRC and the courts, is likely to take the steam out of this market. Recent litigation by HMRC in these areas supports the conclusion, that in the majority of cases, schemes will fail.

As most of the more complex avoidance schemes are beyond the reach, financially, of most UK tax payers, in some respects this area of concern for the profession does not impact a large proportion of the tax advice handed down by high street firms to their clients.

The worry is that as the Treasury becomes ever needier, the profession will be bullied by future legislation to adopt progressively prescriptive tax compliance for their clients. The age of carefully researched and entirely legitimate tax planning maybe the next target for HMRC.

Published September 2015