DOTAS, Follower Notices and Accelerated Payments

Question 1

How do the DOTAS rules operate?

6 Points

Answer 1

1. A person (“Scheme promoter”) creates a tax avoidance scheme and sells it to a client.
2. The scheme promoter must disclose full details of the scheme to HMRC within five days of making it available.
3. HMRC issue the promoter with an eight digit scheme reference number (SRN).
4. The promoter provides each client who uses the scheme with the SRN.
5. The client must then include the SRN on their tax return in the period they use the scheme.
6. HMRC will then be aware that a tax avoidance scheme has been used by the taxpayer.

Question 2

When does a tax scheme need to be disclosed?

3 points

Answer 2

1. Where it enables a person to obtain a tax advantage;
2. A tax advantage is one of the main benefits of the arrangement; and
3. It is a “Hallmarked” scheme

Question 3

Name five “Hallmarks” set out in SI 2006/1543?

Answer 3

1. Confidentiality - From other promotors or HMRC
2. Premium fee - Is charged
3. Loss schemes
4. A stanardised tax product
5. Certain leasing arrangements

Question 4

When do penalties apply to DOTAS and what are these?

Answer 4

Penalties apply when the promoter fails to:

• Disclose the scheme to HMRC or provide clients with SRN.
• Provide HRMC with deatils of the users.
• Respond to HMRC enquires regarding the scheme in the time limit.

Penalty for failure to notify HMRC of the scheme is £600 per day in the initial period (Max £1m), then £600 per day if the failure continues

The penalty for other failures is £5,000, then £600 per day if the failure continutes

Question 5

What is the purpose of Follower Notices and where can the conditions be found in legislation?

Answer 5

Follower Notices allow HMRC to force users of tax avoidance schemes which have been defeated to amend their tax returns.

Can be found in s.204 FA 2014

Question 6

What is the requirement for Accelerated Payments and where can the conditions be found in legislation?

Answer 6

It requires users of a tax avoidance scheme who have been issued a follower notice to make payments of the tax avoided.

Payments will only be refunded if the scheme is ultimately found to work.

Can be found in s.219 FA 2014

Question 7

What is the time limit to take corrective action/make representations if do not agree with follow notices and what is the penalty for not taking corrective action in the time limit for a Follower Notice?

Answer 7

90 days from the date the notice was issued

Penalty is between 10% and 30% of the denied tax advantage

Question 8

What is the time limit to make accelerated payments if no representations have been made and if representations have been made?

Answer 8

If no representations made to HMRC, 90 days from the notice date

If representations have been made, the later of:
- 30 days from when HMRC make their decision;
- 90 days from original notice date.