In Budget 2016, the government expanded on actions that it is proposed to bring in to fulfil its manifesto promise to "tackle tax evasion and aggressive tax avoidance". This includes measures against those persons regarded as "enabling" tax avoidance schemes. HMRC has now set out its vision on how such measures against "enablers" might work, in the form of a consultation document published on 17 August 2016.

Currently, professionals such as accountants, tax advisors, IFAs and lawyers cannot be sanctioned directly by HMRC as part of its bid to combat so-called “avoidance” arrangements. Expanding the ambit of sanctions beyond the taxpayer to an ill-defined category of "enablers" in respect of such arrangements has therefore been a long-standing aspiration for HMRC, which now comes one significant step closer to fulfilment with this consultation. The document discusses how sanctions might be applied directly to those in the "supply chain" of tax avoidance arrangements, which expressly applies not only to those who design, market or facilitate such arrangements, but also those who act solely in a relevant advisory capacity. The tax and financial services advisory community will therefore wish to pay particular regard to the options laid out in the consultation document. The deadline for responses is 12 October 2016, and the consultation document can be found at


It is difficult in the current climate to take issue with a proposal (even if targeted at advisers rather than principals), insofar as it were to be focused upon the particularly egregious examples of abusive tax arrangements that continue to make headlines. Unfortunately, the main objection that may legitimately be raised in respect of this particular consultation is that it further perpetuates the blurring of the fundamental distinction between avoidance and evasion, which one suspects is not accidental. Indeed, in critical respects, the consultation document expressly raises the possibility that this "enablers" regime might be modelled on the new offshore evasion regime on which HMRC consulted last year, despite the enablers regime explicitly not being confined to cases of evasion.

It is also a reality that the long period since the 2008 economic crisis has seen a significant realignment that is likely to be permanent in the balance struck by the courts between taxpayer and Revenue, in favour of the latter. Unless these new enabler measures were to be implemented retrospectively (which we would hope would be unthinkable), we now live in a world where mass-produced and marketed tax schemes are now far more effectively monitored and screened by HMRC than in the past, thanks to the DOTAS regime (disclosure of tax avoidance schemes) and APN regime (Accelerated Payment Notices), the latter of which in particular is now beginning to bite on the very large numbers of historic tax scheme claims that have yet to be resolved.

If the new enablers regime will therefore not apply to the mass-produced and marketed schemes of the past, what about the bespoke tax planning advice for which clients continue to need, and for which they place reliance upon, their advisers? Bespoke planning remains a difficult area for HMRC to police, but is similarly susceptible to be challenged as avoidance, and may be no more likely to withstand such challenge. Witness, for example, the concern that some advisers may have resorted too readily to individual planning that was dependent upon opaque ownership of foreign trust and corporate structures, which attracted significant public attention following the so-called "Panama papers" disclosure.

Considerations for advisers

To assist those in the advisory community who may wish to consider responding to the consultation document, we would highlight the following features of it which seem to us particularly to warrant scrutiny:

1. Mere advice

The thrust of the proposal is that sanctions should be available against "anyone in the supply chain who benefits from an end user implementing tax avoidance arrangements and without whom the arrangements as designed could not be implemented".

This explicitly goes beyond those who promote or market such arrangements, and will extend, for example, to an adviser who is consulted by a client considering whether or not to enter into an arrangement.

But how far into pure advisory work might this extend? Consideration is given in the document to the position of an adviser who provides general accounting and taxation services in the course of which he submits a tax return for a client, which is later found to be incorrect as a result of tax arrangements being defeated as avoidance. The document gives the apparently confident answer that HMRC would not want a penalty applied to the adviser – but only if the adviser had not advised when the arrangements were entered into and could show that all appropriate disclosures were made when that return was submitted.

The prospect of an adviser being potentially at risk of sanction because his or her client makes inadequate disclosures after the event is a troubling signal of the intended scope of "enablers".

2. Conduct threshold

The consultation does not expressly deal with the standard or quality of wrongdoing required of an enabler in order to render him or herself liable to sanctions.

The discussion in the document is of applicable "safeguards", such as an "ignorance" test (modelled on the DOTAS regime), where for example a person has insufficient knowledge of the overall arrangements given the limited nature of their role. There are also other "safeguards" discussed.

What is notably missing, however, is any suggestion that it would also be necessary for HMRC to establish carelessness or worse on the part of the adviser. Short of "ignorance", the regime envisaged appears in principle to be one of strict liability (i.e. capable of applying in principle even to a reasonably careful adviser). Whilst, again, it is not explicitly addressed, there is more than a suggestion that the burden of establishing such "safeguards" as might be included in the regime would be upon the adviser, not least as the consultation also separately proposes that the burden of proof should be reversed in respect of the application of sanctions against the taxpayer.

3. Defeated arrangements

The consultation recognises that there can be no question of sanctions against enablers unless the relevant tax arrangements have in fact been defeated by HMRC. The consultation proposes a definition of "defeated arrangements" that is modelled upon similar concepts in other relevant tax regimes.

Even the apparently more concrete and predictable examples given of defeat (such as the issue of a Follower Notice under the APN regime) can on analysis readily be seen to be highly dependent upon subsequent decisions that may be taken many years after the advice in question. Given the way the pendulum swings in litigation between taxpayer and Revenue, a reasonably careful adviser might find himself sanctioned based upon wholly different principles and attitudes when he was simply applying to the best of his ability the law as it stood (and as it was understood by the profession to be) at the time that he was engaged by his client.

4. Enforcement issues

One of the reasons given in the consultation for an enablers sanction regime is to deal with the absence of a penalty where a taxpayer claims that he or she relied (reasonably) upon an adviser. It is partly for this reason that the consultation says that HMRC should be free to pursue the adviser alone, unlike last year's consultation on a new offshore evasion regime where it is proposed that it be necessary first to establish a penalty against the taxpayer.

The current consultation points out that information powers may be needed so as to ensure that the enablers within the "supply chain" are properly identified. However, the consultation says nothing about how, in practice, an adviser might seek to defend him or herself in the event that HMRC decides to target the adviser, either alongside the taxpayer or alone.

A very real problem arises as one can readily envisage that a taxpayer might see a real or perceived benefit in preventing the adviser from revealing confidential (and perhaps even privileged) material from the advisory file, if that might help the adviser to distance himself from his client's decision to enter into the arrangements, and thereby more or less directly reduce the client’s ability to mitigate his or her own penalty.

The consultation acknowledges that there may need to be rules restricting the aggregate level of penalties where, as is apparently envisaged in many cases, there may be multiple enablers in the "supply chain". The option is also raised, however, that enablers might be liable by way of fine for an amount equal to the tax due following the defeat of the relevant arrangements. This is a troubling possibility, which should as a minimum clearly be expressed in any regime to be an option of last resort, insofar as it could incentivise HMRC to focus on recovery solely from the adviser without the difficulty or simply the inconvenience of pursuing the taxpayer at all, who is after all properly to be regarded as the primary (albeit not necessarily sole) focus.