UK Government Proposes an Expansion of the DOTAS Rules (Disclosure of Tax Avoidance Schemes)
A new consultation document has proposed that the Disclosure of Tax Avoidance Schemes (DOTAS) rules should be widened so that more tax schemes will be caught by new powers requiring accelerated payments of tax.
Under the DOTAS regime, the promoters of certain kinds of tax schemes are required to notify HM Revenue & Customs (HMRC) with those schemes’ details. Once notified, HMRC will issue the scheme with a DOTAS number which then must be included on any tax returns relating to the scheme. However, HMRC’s issuance of a DOTAS number does not indicate that it has approved the scheme as being compliant with tax rules.
This widening of the DOTAS regime (which covers schemes which already exist) comes a month after HMRC was given controversial new powers to demand that tax-payers who have participated in a scheme with a DOTAS number which is under enquiry or appeal pay disputed amounts of tax to HMRC within ninety days of being asked to do so, even if there has not been a final legal ruling against that tax payer. These demands are called “accelerated payment notices”.
In addition, where there has been a successful legal ruling against a participant in a marketed avoidance scheme with a DOTAS number, HMRC can demand, via a “follower notice”, that participants in other schemes pay disputed tax to HMRC if it believes that the legal ruling is “relevant” to those schemes. Once a follower notice has been issued, an accelerated payment notice can also be issued against the same tax-payer, thereby requiring that disputed tax be paid to HMRC within ninety days.
Accelerated payment and follower notices cannot themselves be appealed (but they may be subject to judicial review). However, tax will be repaid to a tax-payer if the tax-payer is successful in their wider dispute with HMRC.
The consultation document is available here.