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HMRC fails to enforce IFA tax ‘enabler’ penalties in first year

HM Revenue & Customs says new rules to stop advisers facilitating tax avoidance schemes are already having an impact just over a year into the new regime, but no fines have been levied yet.

Under last year’s Finance Act, any person who “enables” the use of abusive tax arrangements, which are later defeated by HMRC, could be hit with a penalty of up to 100 per cent of the fees they received.

The government made specific mention that the rules will include IFAs, as well as other types of advisers like accountants and legal counsel.

Money Marketing sent a Freedom of Information Act request to HMRC for information on how many IFAs had faced penalties to date, and how much they had had to pay back to the taxman, compared to other types of advisory firms.

The enablers penalties regime received Royal Assent on November 2017, so only affects tax arrangements entered into after that date, therefore HMRC says it has not yet levied any fines.

However, it says it is aware that some promoters have already shut down contested schemes with the new rules in mind.

HMRC says: “We have not yet charged an enablers penalty but the legislation is already having an impact. A promoter of tax avoidance announced in 2017 that it was closing down and no longer offering any avoidance arrangements or schemes. They quoted the enablers penalty as one of the reasons for their decision.”

‘IFAs as enablers’: How HMRC will target advisers behind tax avoidance schemes

Last July, Money Marketing asked HMRC for any estimates of how many advisers would be caught up in the rules and the volume of fines they would be likely to receive.

HMRC said that though it had “engaged with a variety of stakeholders, including those involved in the provision of financial advice, and considered the impact across all enablers including independent financial advisers” and “the impact of the proposed measure was then modelled and costed using a typical avoidance model involving the expected range of enablers, including but not limited to IFAs”, it was unable to provide a specific estimate.

Last year’s Budget showed the Government expectedto generate £50m from the measures in 2018/19, £20m in 2019/20, £20m in 2020/21 and £15m in 2021/22.

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