Finance Bill (HC Bill 102)

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(f) about the manner of proving for any purpose the
contents of any records (including provision for the
application of conclusive or other presumptions).

(11) Regulations under sub-paragraph (5) requiring records to be
5kept or preserved in electronic form may—

(a) allow any authorisation or requirement for which the
regulations may provide to be given by means of a
specific or general direction given by the
Commissioners,

(b) 10provide that the conditions of an authorisation or
requirement are to be taken to be satisfied only where
the Commissioners are satisfied as to specified
matters.”

(4) In paragraph 6A (power to direct keeping of records), for sub-paragraph (7)
15substitute—

(7) Regulations under paragraph 6(5) apply for the purposes of this
paragraph as they apply for the purposes of paragraph 6.”

(5) In section 83(1) of VATA 1994 (appealable decisions), for paragraph (zc)
substitute—

(zc) 20a decision of the Commissioners about the application of any
provision of regulations under paragraph 2 or 6 of Schedule 11,
or of regulations under section 135 or 136 of the Finance Act
2002 relating to VAT, which—

(i) requires returns to be made or information to be
25submitted by electronic communications, or

(ii) requires records to be kept or preserved in electronic
form,

(including in particular a decision as to whether such a
requirement applies and a decision to impose a penalty).”

(6) 30Subsections (3)(a) and (4) of this section come into force when the first
regulations under paragraph 6(5) of Schedule 11 to VATA 1994 come into
force.

(7) Regulations under paragraph 6(5) of Schedule 11 to VATA 1994 may not make
provision requiring records to be kept or preserved in electronic form which
35has effect before 1 April 2019.

Enquiries

63 Partial closure notices

Schedule 15 makes provision for partial closure notices in respect of enquiries
under sections 9A, 12ZM and 12AC of TMA 1970 and Schedule 18 to FA 1998.

40Avoidance etc

64 Errors in taxpayers’ documents

(1) Schedule 24 to FA 2007 (penalties for errors) is amended as set out in
subsections (2) and (3).

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(2) After paragraph 3 insert—

“Errors related to avoidance arrangements

3A (1) This paragraph applies where a document of a kind listed in the
Table in paragraph 1 is given to HMRC by a person (“P”) and the
5document contains an inaccuracy which—

(a) falls within paragraph 1(2), and

(b) arises because the document is submitted on the basis that
particular avoidance arrangements (within the meaning of
paragraph 3B) had an effect which in fact they did not have.

(2) 10It is to be presumed that the inaccuracy was careless, within the
meaning of paragraph 3, unless—

(a) the inaccuracy was deliberate on P’s part, or

(b) P satisfies HMRC or (on an appeal notified to the tribunal) the
tribunal that P took reasonable care to avoid inaccuracy.

(3) 15In considering whether P took reasonable care to avoid inaccuracy,
HMRC and (on an appeal notified to the tribunal) the tribunal must
take no account of any evidence of any reliance by P on advice where
the advice is disqualified.

(4) Advice is “disqualified” if any of the following applies—

(a) 20the advice was given to P by an interested person;

(b) the advice was given to P as a result of arrangements made
between an interested person and the person who gave the
advice;

(c) the person who gave the advice did not have appropriate
25expertise for giving the advice;

(d) the advice took no account of P’s individual circumstances;

(e) the advice was addressed to, or given to, a person other than
P;

but this is subject to sub-paragraphs (5) and (7).

(5) 30Where (but for this sub-paragraph) advice would be disqualified
under any of paragraphs (a) to (c) of sub-paragraph (4), the advice is
not disqualified under that paragraph if at the relevant time P—

(a) has taken reasonable steps to find out whether the advice
falls within that paragraph, and

(b) 35reasonably believes that it does not.

(6) In sub-paragraph (4) “an interested person” means—

(a) a person, other than P, who participated in the avoidance
arrangements or any transaction forming part of them, or

(b) a person who for any consideration (whether or not in
40money) facilitated P’s entering into the avoidance
arrangements.

(7) Where (but for this sub-paragraph) advice would be disqualified
under paragraph (a) of sub-paragraph (4) because it was given by a
person within sub-paragraph (6)(b), the advice is not disqualified
45under that paragraph if—

(a) the person giving the advice had appropriate expertise for
giving it,

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(b) the advice took account of P’s individual circumstances, and

(c) at the time when the question whether the advice is
disqualified arises—

(i) Condition E in paragraph 3B(5) is met in relation to
5the avoidance arrangements, but

(ii) none of Conditions A to D in paragraph 3B(5) is or has
at any time been met in relation to them.

(8) If the document mentioned in sub-paragraph (1) is given to HMRC
by P as a personal representative of a deceased person (“D”)—

(a) 10sub-paragraph (4) is to be read as if—

(i) the references in paragraphs (a) and (b) to P were to P
or D;

(ii) the reference in paragraph (d) to P were to D, and

(iii) the reference in paragraph (e) to a person other than
15P were to a person who is neither P nor D,

(b) sub-paragraph (6) is to be read as if—

(i) the reference in paragraph (a) to P were a reference to
the person to whom the advice was given, and

(ii) the reference in paragraph (b) to P were to D (or,
20where P also participated in the avoidance
arrangements, P or D), and

(c) sub-paragraph (7) is to be read as if the reference in
paragraph (b) to P were to D.

(9) In this paragraph—

  • 25“arrangements” includes any agreement, understanding,
    scheme, transaction or series of transactions (whether or not
    legally enforceable);

  • “the relevant time” means the time when the document
    mentioned in sub-paragraph (1) is given to HMRC;

  • 30“the tribunal” has the same meaning as in paragraph 17 (see
    paragraph 17(5A)).

3B (1) In paragraph 3A “avoidance arrangements” means, subject to sub-
paragraph (3), arrangements which fall within sub-paragraph (2).

(2) Arrangements fall within this sub-paragraph if, having regard to all
35the circumstances, it would be reasonable to conclude that the
obtaining of a tax advantage was the main purpose, or one of the
main purposes, of the arrangements.

(3) Arrangements are not avoidance arrangements for the purposes of
paragraph 3A if (although they fall within sub-paragraph (2))—

(a) 40they are arrangements which accord with established
practice, and

(b) HMRC had, at the time the arrangements were entered into,
indicated its acceptance of that practice.

(4) If, at any time, any of Conditions A to E is met in relation to particular
45arrangements—

(a) for the purposes of this Schedule the arrangements are to be
taken to fall within (and always to have fallen within) sub-
paragraph (2), and

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(b) in relation to the arrangements, sub-paragraph (3) (and the
reference to it in sub-paragraph (1)) are to be treated as
omitted.

This does not prevent arrangements from falling within sub-
5paragraph (2) other than by reason of one or more of Conditions A to
E being met.

(5) Conditions A to E are as follows—

(a) Condition A is that the arrangements are DOTAS
arrangements within the meaning given by section 219(5)
10and (6) of FA 2014;

(b) Condition B is that the arrangements are disclosable VAT
arrangements or disclosable indirect tax arrangements for the
purposes of Schedule 18 to FA 2016 (see paragraphs 8A to 9A
of that Schedule);

(c) 15Condition C is that both of the following apply—

(i) P has been given a notice under a provision
mentioned in sub-paragraph (6) stating that a tax
advantage arising from the arrangements is to be
counteracted, and

(ii) 20that tax advantage has been counteracted under
section 209 of FA 2013;

(d) Condition D is that a follower notice under section 204 of FA
2014 has been given to P by reference to the arrangements
(and not withdrawn) and—

(i) 25the necessary corrective action for the purposes of
section 208 of FA 2014 has been taken in respect of the
denied advantage, or

(ii) the denied advantage has been counteracted
otherwise than as mentioned in sub-paragraph (i);

(e) 30Condition E is that a tax advantage asserted by reference to
the arrangements has been counteracted (by an assessment,
an amendment of a return or claim, or otherwise) on the basis
that an avoidance-related rule applies in relation to P’s
affairs.

(6) 35The provisions referred to in sub-paragraph (5)(c)(i) are—

(a) paragraph 12 of Schedule 43 to FA 2013 (general anti-abuse
rule: notice of final decision);

(b) paragraph 8 or 9 of Schedule 43A to that Act (pooled or
bound arrangements: notice of final decision);

(c) 40paragraph 8 of Schedule 43B to that Act (generic referrals:
notice of final decision).

(7) In sub-paragraph (5)(d) the reference to giving a follower notice to P
includes giving a partnership follower notice in respect of a
partnership return in relation to which P is a relevant partner; and for
45the purposes of this sub-paragraph—

(a) “relevant partner” has the meaning given by paragraph 2(5)
of Schedule 31 to FA 2014;

(b) a partnership follower notice is given “in respect of” the
partnership return mentioned in paragraph 2(2)(a) or (b) of
50that Schedule.

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(8) For the purposes of sub-paragraph (5)(d) it does not matter whether
the denied advantage has been dealt with—

(a) wholly as mentioned in one or other of sub-paragraphs (i)
and (ii) of sub-paragraph (5)(d), or

(b) 5partly as mentioned in one of those sub-paragraphs and
partly as mentioned in the other;

and “the denied advantage” has the same meaning as in Chapter 2 of
Part 4 of FA 2014 (see section 208(3) of and paragraph 4(3) of
Schedule 31 to that Act).

(9) 10For the purposes of sub-paragraph (5)(e) a tax advantage has been
“asserted by reference to” the arrangements if a return, claim or
appeal has been made by P on the basis that the tax advantage results
from the arrangements.

(10) In this paragraph—

  • 15“arrangements” has the same meaning as in paragraph 3A;

  • “avoidance-related rule” has the same meaning as in Part 4 of
    Schedule 18 to FA 2016 (see paragraph 25 of that Schedule);

  • a “tax advantage” includes—

    (a)

    relief or increased relief from tax,

    (b)

    20repayment or increased repayment of tax,

    (c)

    avoidance or reduction of a charge to tax or an
    assessment to tax,

    (d)

    avoidance of a possible assessment to tax,

    (e)

    deferral of a payment of tax or advancement of a
    25repayment of tax,

    (f)

    avoidance of an obligation to deduct or account for
    tax, and

    (g)

    in relation to VAT, anything which is a tax advantage
    for the purposes of Schedule 18 to FA 2016 under
    30paragraph 5 of that Schedule.”

(3) In paragraph 18, after sub-paragraph (5) insert—

(6) Paragraph 3A applies where a document is given to HMRC on behalf
of P as it applies where a document is given to HMRC by P (and in
paragraph 3B(9) the reference to P includes a person acting on behalf
35of P).”

(4) In FA 2014, omit section 276 (which is superseded by the provision inserted by
subsections (2) and (3)).

(5) The amendments made by this section have effect in relation to any document
of a kind listed in the Table in paragraph 1 of Schedule 24 to FA 2007 which—

(a) 40is given to HMRC on or after the day on which this Act is passed, and

(b) relates to a tax period that—

(i) begins on or after 6 April 2017, and

(ii) ends on or after the day on which this Act is passed.

(6) In subsection (5) “tax period”, and the reference to giving a document to
45HMRC, have the same meaning as in Schedule 24 to FA 2007 (see paragraph 28
of that Schedule).

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65 Penalties for enablers of defeated tax avoidance

Schedule 16 makes provision for penalties for persons who enable tax
avoidance which is defeated.

66 Disclosure of tax avoidance schemes: VAT and other indirect taxes

(1) 5Schedule 17 contains provision about the disclosure of tax avoidance schemes
involving VAT or other indirect taxes.

(2) In consequence of the provision made by Schedule 17, section 58A of, and
Schedule 11A to, VATA 1994 (disclosure of VAT avoidance schemes) cease to
have effect to require a person to disclose any scheme which—

(a) 10is first entered into by that person on or after 1 January 2018,

(b) constitutes notifiable arrangements under Schedule 17,

(c) implements proposals which are notifiable proposals under Schedule
17.

(3) No scheme or proposed scheme may be notified to the Commissioners under
15paragraph 9 of Schedule 11A to VATA 1994 (voluntary notification of schemes)
on or after 1 January 2018.

(4) This section and Schedule 17 come into force—

(a) so far as is necessary for enabling the making of regulations under that
Schedule, on the passing of this Act, and

(b) 20for all other purposes, on 1 January 2018.

67 Requirement to correct certain offshore tax non-compliance

Schedule 18 makes provision for and in connection with requiring persons to
correct any offshore tax non-compliance subsisting on 6 April 2017.

68 Penalty for transactions connected with VAT fraud etc

(1) 25VATA 1994 is amended as follows.

(2) After section 69B (penalty for breach of record-keeping requirements imposed
by directions) insert—

69C Transactions connected with VAT fraud

(1) A person (T) is liable to a penalty where—

(a) 30T has entered into a transaction involving the making of a
supply by or to T (“the transaction”), and

(b) conditions A to C are satisfied.

(2) Condition A is that the transaction was connected with the fraudulent
evasion of VAT by another person (whether occurring before or after T
35entered into the transaction).

(3) Condition B is that T knew or should have known that the transaction
was connected with the fraudulent evasion of VAT by another person.

(4) Condition C is that HMRC have issued a decision (“the denial
decision”) in relation to the supply which—

(a) 40prevents T from exercising or relying on a VAT right in relation
to the supply,

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(b) is based on the facts which satisfy conditions A and B in relation
to the transaction, and

(c) applies a relevant principle of EU case law (whether or not in
circumstances that are the same as the circumstances in which
5any relevant case was decided by the European Court of
Justice).

(5) In this section “VAT right” includes the right to deduct input tax, the
right to apply a zero rate to international supplies and any other right
connected with VAT in relation to a supply.

(6) 10The relevant principles of EU case law for the purposes of this section
are the principles established by the European Court of Justice in the
following cases—

(a) joined Cases C-439/04 and C-440/04 Axel Kittel v. Belgian State;
Belgium v. Recolta Recycling (denial of right to deduct input tax),
15and

(b)
Case C-273/11 (b)Mecsek-Gabona Kft v Nemzeti Adó- és Vámhivatal
Dél-dunántúli Regionális Adó Főigazgatósága
(denial of right to
zero rate),

as developed or extended by that Court (whether before or after the
20coming into force of this section) in other cases relating to the denial or
refusal of a VAT right in order to prevent abuses of the VAT system.

(7) The penalty payable under this section is 30% of the potential lost VAT.

(8) The potential lost VAT is—

(a) the additional VAT which becomes payable by T as a result of
25the denial decision,

(b) the VAT which is not repaid to T as a result of that decision, or

(c) in a case where as a result of that decision VAT is not repaid to
T and additional VAT becomes payable by T, the aggregate of
the VAT that is not repaid and the additional VAT.

(9) 30Where T is liable to a penalty under this section the Commissioners
may assess the amount of the penalty and notify it to T accordingly.

(10) No assessment of a penalty under this section may be made more than
two years after the denial decision is issued.

(11) The assessment of a penalty under this section may be made
35immediately after the denial decision is made (and notice of the
assessment may be given to T in the same document as the notice of the
decision).

(12) Where by reason of actions involved in making a claim to exercise or
rely on a VAT right in relation to a supply T—

(a) 40is liable to a penalty for an inaccuracy under paragraph 1 of
Schedule 24 to the Finance Act 2007 for which T has been
assessed (and the assessment has not been successfully
appealed against by T or withdrawn), or

(b) is convicted of an offence (whether under this Act or otherwise),

45those actions do not give rise to liability to a penalty under this section.

69D Penalties under section 69C: officers’ liability

(1) Where—

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(a) a company is liable to a penalty under section 69C, and

(b) the actions of the company which give rise to that liability were
attributable to an officer of the company (“the officer”),

the officer is liable to pay such portion of the penalty (which may be
5equal to or less than 100%) as HMRC may specify in a notice given to
the officer (a “decision notice”).

(2) Before giving the officer a decision notice HMRC must—

(a) inform the officer that they are considering doing so, and

(b) afford the officer the opportunity to make representations about
10whether a decision notice should be given or the portion that
should be specified.

(3) A decision notice—

(a) may not be given before the amount of the penalty due from the
company has been assessed (but it may be given immediately
15after that has happened), and

(b) may not be given more than two years after the denial decision
relevant to that penalty was issued.

(4) Where the Commissioners have specified a portion of the penalty in a
decision notice given to the officer—

(a) 20section 70 applies to the specified portion as to a penalty under
section 69C,

(b) the officer must pay the specified portion before the end of the
period of 30 days beginning with the day on which the notice is
given,

(c) 25section 76(9) applies as if the decision notice were an assessment
notified under section 76, and

(d) a further decision notice may be given in respect of a portion of
any additional amount assessed in an additional assessment.

(5) HMRC may not recover more than 100% of the penalty through issuing
30decision notices in relation to two or more persons.

(6) A person is not liable to pay an amount by virtue of this section if the
actions of the company concerned are attributable to the person by
reference to conduct for which the person has been convicted of an
offence.

35In this subsection “conduct” includes omissions.

(7) In this section “company” means a body corporate or unincorporated
association but does not include a partnership, a local authority or a
local authority association.

(8) In its application to a body corporate other than a limited liability
40partnership “officer” means—

(a) a director (including a shadow director within the meaning of
section 251 of the Companies Act 2006),

(b) a manager, or

(c) a secretary.

(9) 45In in its application to a limited liability partnership “officer” means a
member.

(10) In its application in any other case, “officer” means—

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(a) a director,

(b) a manager,

(c) a secretary, or

(d) any other person managing or purporting to manage any of the
5company’s affairs.

69E Publication of details of persons liable to penalties under section 69C

(1) The Commissioners may publish information about a person if—

(a) in consequence of an investigation the person has been found
liable to one or more penalties under section 69C (the amount of
10which has been assessed), and

(b) the potential lost VAT in relation to the penalty (or the
aggregate of the potential lost VAT in relation to each of the
penalties) exceeds £50,000.

(2) The information that may be published under subsection (1) is—

(a) 15the person’s name (including any trading name, previous name
or pseudonym),

(b) the person’s address (or registered office),

(c) the nature of any business carried on by the person,

(d) the amount of the penalty or penalties in question,

(e) 20the periods or times to which the actions giving rise to the
penalty or penalties relate,

(f) any other information that the Commissioners consider it
appropriate to publish in order to make clear the person’s
identity.

(3) 25In a case where—

(a) the requirements in subsection (1)(a) and (b) are met in relation
to a penalty or penalties for which a company is liable,

(b) information about the company is published by virtue of this
section,

(c) 30a person (“the officer”) has been given a decision notice under
section 69D specifying a portion of the penalty (or, if there is
more than one penalty, of any of the penalties) payable by the
company as a portion which the officer is liable to pay, and

(d) the amount (or, if the decision notice specifies portions of more
35than one penalty, the aggregate amount) which the officer is
liable to pay under the decision notice exceeds £25, 000,

the Commissioners may publish information about the officer.

(4) The information that may be published under subsection (3) is—

(a) the officer’s name,

(b) 40the officer’s address,

(c) the officer’s position (or former position) in the company,

(d) the amount of any penalty imposed on the company of which a
portion is payable by the officer under the decision notice and
the portion so payable,

(e) 45the periods or times to which the actions giving rise to any such
penalty relate,

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(f) any other information that the Commissioners consider it
appropriate to publish in order to make clear the officer’s
identity.

(5) Information published under this section may be published in any
5manner that the Commissioners consider appropriate.

(6) Before publishing any information under this section the
Commissioners must—

(a) inform the person or officer to which it relates that they are
considering doing so (in the case of an officer, on the
10assumption that they publish information about the company),
and

(b) afford the person or officer the opportunity to make
representations about whether it should be published.

(7) No information may be published under subsection (1) before the day
15on which the penalty becomes final or, where more than one penalty is
involved, the latest day on which any of the penalties becomes final.

(8) No information may be published under subsection (1) for the first time
after the end of the period of one year beginning with that day.

(9) No information may be published under subsection (3) before
20whichever is the later of—

(a) the day mentioned in subsection (7), and

(b) the day on which the decision notice given to the officer
becomes final.

(10) No information may be published under subsection (3) for the first time
25after the end of the period of one year beginning with the later of the
two days mentioned in subsection (9).

(11) No information may be published (or continue to be published) under
subsection (1) or (3) after the end of the period of three years beginning
with the day mentioned in subsection (7).

(12) 30For the purposes of this section a penalty or a decision notice becomes
final when the time for any appeal or further appeal relating to it
expires or, if later, any appeal or final appeal relating to it is finally
determined.

(13) The Treasury may by regulations made by statutory instrument—

(a) 35amend subsection (1) to vary the amount for the time being
specified in paragraph (b), or

(b) amend subsection (3) to vary the amount for the time being
specified in paragraph (d).

(14) A statutory instrument containing regulations under subsection (13) is
40subject to annulment in pursuance of a resolution of the House of
Commons.”

(3) In section 70 (mitigation of penalties)—

(a) in the heading, for “and 67” substitute “67, 69A and 69C”,

(b) in subsection (1) for “or 69A” substitute “69A or 69C”, and