© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
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E6: DOTAS
Introduction
"(1) This Part makes provision about the disclosure of information in relation to arrangements, or proposed arrangements, that enable, or might be expected to enable, a person to obtain a tax advantage.
(2) Among other things, this Part—
(a) imposes duties to provide information to HMRC (and others);
(b) allows HMRC to allocate reference numbers in relation to arrangements and proposed arrangements (in cases where the disclosure duties have been complied with and in other cases);
(c) makes provision about publication of information about arrangements and proposed arrangements, and persons involved in their supply;
(d) makes provision about penalties." (FA 2004, s.305A)
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Duty of promoter to provide information
Notifiable proposal duty
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"(1) A person who is a promoter in relation to a notifiable proposal must, within the prescribed period after the relevant date, provide the Board with prescribed information relating to the notifiable proposal." (FA 2004, s.308(1))
Relevant date
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"(2) In subsection (1) “the relevant date” means the earliest of the following—
(za) the date on which the promoter first makes a firm approach to another person in relation to a notifiable proposal,
(a) the date on which the promoter makes the notifiable proposal available for implementation by any other person, or
(b) the date on which the promoter first becomes aware of any transaction forming part of notifiable arrangements implementing the notifiable proposal." (FA 2004, s.308(2))
Multiple promoters: compliance by one discharges the other (subject to conditions)
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"(4) Subsection (4A) applies where a person complies with subsection (1) in relation to a notifiable proposal for arrangements and another person is—
(a) also a promoter in relation to the notifiable proposal or is a promoter in relation to a notifiable proposal for arrangements which are substantially the same as the proposed arrangements (whether they relate to the same or different parties), or
(b) a promoter in relation to notifiable arrangements implementing the notifiable proposal or notifiable arrangements which are substantially the same as notifiable arrangements implementing the notifiable proposal (whether they relate to the same or different parties).
(4A) Any duty of the other person under subsection (1) or (3) in relation to the notifiable proposal or notifiable arrangements is discharged if—
(a) the person who complied with subsection (1) has notified the identity and address of the other person to HMRC or the other person holds the reference number allocated to the proposed notifiable arrangements under section 311, and
(b) the other person holds the information provided to HMRC in compliance with subsection (1)." (FA 2004, s.308(4) - (4A))
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Notifiable arrangement duty
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"(3) A person who is a promoter in relation to notifiable arrangements must, within the prescribed period after the date on which he first becomes aware of any transaction forming part of the notifiable arrangements, provide the Board with prescribed information relating to those arrangements, unless those arrangements implement a proposal in respect of which notice has been given under subsection (1)." (FA 2004, s.308(3))
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Multiple promoters: compliance by one discharges the other (subject to conditions)
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"(4B) Subsection (4C) applies where a person complies with subsection (3) in relation to notifiable arrangements and another person is—
(a) a promoter in relation to a notifiable proposal for arrangements which are substantially the same as the notifiable arrangements (whether they relate to the same or different parties), or
(b) also a promoter in relation to the notifiable arrangements or notifiable arrangements which are substantially the same (whether they relate to the same or different parties).
(4C) Any duty of the other person under subsection (1) or (3) in relation to the notifiable proposal or notifiable arrangements is discharged if—
(a) the person who complied with subsection (3) has notified the identity and address of the other person to HMRC or the other person holds the reference number allocated to the notifiable arrangements under section 311, and
(b) the other person holds the information provided to HMRC in compliance with subsection (3)." (FA 2004, s.308(4B) - (4C))
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Promoter of two proposals/arrangements that are substantially the same: no need to disclose twice
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"(5) Where a person is a promoter in relation to two or more notifiable proposals or sets of notifiable arrangements which are substantially the same (whether they relate to the same parties or different parties), he need not provide information under subsection (1) or (3) if he has already provided information under either of those subsections in relation to any of the other proposals or arrangements." (FA 2004, s.308(5))
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- Awareness of transaction does not require awareness that it was notifiable as a matter of law
"[70(4)] The word "aware" in s 308(3) FA 2004 refers to awareness of the fact of a transaction, and awareness of the facts of the arrangements that are notifiable arrangements, and awareness of the fact that the former forms part of the latter. The obligation under s 308(3) will arise regardless of whether or not there is an awareness that, as a matter of law, the arrangements of which the transaction forms part are notifiable arrangements within the meaning of s 306(1) FA 2004. The Tribunal rejects the Respondent's argument that the obligation under s 308(3) FA 2004 arose only when the Respondent became aware that the arrangements were notifiable." (HMRC v. IPS Progression Limited [2024] UKFTT 136 (TC), Judge Staker)
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- Notification not invalidated by stating it is on a protective basis
"[71(6)] The Tribunal also cannot accept this argument. It would be unjust and oppressive if it were correct. Situations may arise where there is disagreement between HMRC and a claimed promoter as to whether or not s 308(3) FA 2004 requires disclosure. The claimed promoter should not be faced with a choice of either immediately irrevocably conceding to HMRC that disclosure is required, or of risking continuing £600 daily penalties while seeking resolution of the disagreement. Disclosure on a protective basis should be possible. Indeed, even if disclosure is made without reservation, the person making the disclosure should not be precluded from arguing subsequently that the DOTAS legislation did not in fact require the disclosure that was made." (HMRC v. IPS Progression Limited [2024] UKFTT 136 (TC), Judge Staker)
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- Reasonable excuse for failing to notify must exist from beginning of period of failure
"[72] The Respondent does not have a reasonable excuse for its failure to comply with this obligation between 19 April 2016 and 24 April 2022.
(1) For purposes of s 118(2) TMA, a person cannot have a reasonable excuse for failing to do something required to be done within a time limit, if the circumstances relied upon did not exist on or before the date on which the time limit expired.
(a) Thus, if the Respondent did not have a reasonable excuse by 18 April 2016, events occurring thereafter therefore cannot retrospectively provide a reasonable excuse for the failure to have provided the prescribed information by that date.
(b) However, events occurring after expiry of the deadline may nonetheless be taken into account in determining the quantum of the penalty (as to which see paragraph 76 below).
(2) The Respondent does not have a reasonable excuse on the ground that it obtained specialist third party professional advice that disclosure under DOTAS was not required.
(a) The only third party professional advice said to have been obtained by the Respondent prior to 19 April 2016 was an advice from a consultancy firm in 2015. According to the witness statements of Mr Hall and Mr Champion, these consultants held themselves out as experts and were clear that DOTAS did not apply to the arrangements.
(b) This advice was not in evidence. The Respondent claims no longer to be able to locate it. An e-mail exchange in June 2015 between the Respondent's compliance manager and the consultants indicates that the former sent the consultants copies of a draft employment agreement and bonus agreement, asking the consultants to review these. According to Mr MacGregor's oral evidence, that e-mail went on to state that the Respondent intended to give employees a loan against a future bonus, and requested an opinion from the consultants on the question whether the attached documentation "does what we intend". The evidence does not suggest that the consultants were asked to advise on whether what was proposed would need to be disclosed under DOTAS. The e-mail chain ends with the consultants offering to provide an advice within a stated time for a stated sum. There is no further evidence that the advice was ever provided.
(c) The burden of proof is on the Respondent to establish the existence of circumstances relied upon to establish a reasonable excuse. The evidence does not establish on a balance of probability that the consultants gave the advice in question, nor that the advice was clear that DOTAS did not apply, nor that it would have been reasonable in all the circumstances for the Respondent to have relied on that advice. The advice itself is not in evidence. Mr MacGregor said in his evidence that he could not be certain that it was ever received (T D2, page 34 line 24 to page 35 line 15, page 36 lines 9-12). Mr Champion when asked if he had seen a copy of the advice said that it would have been the compliance manager who had dealt with this. Mr Champion also accepted that the e-mail did not appear to request advice on DOTAS.
(3) None of the other matters relied on by the Respondent as providing a reasonable excuse had occurred by 18 April 2016." (HMRC v. IPS Progression Limited [2024] UKFTT 136 (TC), Judge Staker - penalty of £900k)
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Duty of promoter to provide updated information
"(1) This section applies where—
(a) information has been provided under section 308 about any notifiable arrangements, or proposed notifiable arrangements, to which a reference number is allocated under section 311, and
(b) after the provision of the information, there is a change in relation to the arrangements of a kind mentioned in subsection (2).
(2) The changes referred to in subsection (1)(b) are—
(a) a change in the name by which the notifiable arrangements, or proposed notifiable arrangements, are known;
(b) a change in the name or address of any person who is a promoter in relation to the notifiable arrangements or, in the case of proposed notifiable arrangements, the notifiable proposal.
(3) A person who is a promoter in relation to the notifiable arrangements or, in the case of proposed notifiable arrangements, the notifiable proposal must inform HMRC of the change mentioned in subsection (1)(b) within 30 days after it is made.
(4) Subsections (5) and (6) apply for the purposes of subsection (3) where there is more than one person who is a promoter in relation to the notifiable arrangements or proposal.
(5) If the change in question is a change in the name or address of a person who is a promoter in relation to the notifiable arrangements or proposal, it is the duty of that person to comply with subsection (3).
(6) If a person provides information in compliance with subsection (3), the duty imposed by that subsection on any other person, so far as relating to the provision of that information, is discharged." (FA 2004, s.310C)
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No promoter in the UK (duty on the person entering into transactions)
No promoter
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"Any person who enters into any transaction forming part of notifiable arrangements as respects which neither he nor any other person in the United Kingdom is liable to comply with section 308 (duties of promoter) or section 309 (duty of person dealing with promoter outside the United Kingdom) must at the prescribed time provide the Board with prescribed information relating to the notifiable arrangements." (FA 2004, s.310)
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No promoter in the UK
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"(1) Any person (“the client”) who enters into any transaction forming part of any notifiable arrangements in relation to which—
(a) a promoter is resident outside the United Kingdom, and
(b) no promoter is resident in the United Kingdom,
must, within the prescribed period after doing so, provide the Board with prescribed information relating to the notifiable arrangements.
(2) Compliance with section 308(1) by any promoter in relation to the notifiable arrangements discharges the duty of the client under subsection (1)." (FA 2004, s.309)
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HMRC can obtain supplemental information
From promoter (apply to Tribunal)
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"(1) This section applies where—
(a) a promoter (P) has provided information in purported compliance with section 308(1) or (3), but
(b) HMRC believe that P has not provided all the prescribed information.
(2) HMRC may apply to the tribunal for an order requiring P to provide specified information about, or documents relating to, the notifiable proposal or arrangements.
(3) The tribunal may make an order under subsection (2) in respect of information or documents only if satisfied that HMRC have reasonable grounds for suspecting that the information or documents—
(a) form part of the prescribed information, or
(b) will support or explain the prescribed information.
(4) A requirement by virtue of subsection (2) shall be treated as part of P's duty under section 308(1) or (3).
(5) In so far as P's duty under section 308(1) or (3) arises out of a requirement by virtue of subsection (2) above, the prescribed period shall begin after a date prescribed for the purpose.
(6) In so far as P's duty under section 308(1) or (3) arises out of a requirement by virtue of subsection (2) above, the prescribed period—
(a) may be of a different length than the prescribed period for the purpose of other applications of section 308(1) or (3), and
(b) may be extended by HMRC by direction." (FA 2004, s.308A)
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General power (request followed by application)
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"(1) This section applies where—
(a) a person has provided the prescribed information about notifiable proposals or arrangements in compliance with section 308, 309 or 310, or
(b) a person has provided information in purported compliance with section 309 or 310 but HMRC believe that the person has not provided all the prescribed information.
(2) HMRC may require the person to provide—
(a) further specified information about the notifiable proposals or arrangements (in addition to the prescribed information under section 308, 309 or 310);
(b) documents relating to the notifiable proposals or arrangements.
(3) Where HMRC impose a requirement on a person under this section, the person must comply with the requirement within—
(a) the period of 10 working days beginning with the day on which HMRC imposed the requirement, or
(b) such longer period as HMRC may direct." (FA 2004, s.310A)
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Application to Tribunal
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"(1) This section applies where HMRC—
(a) have required a person to provide information or documents under section 310A, but
(b) believe that the person has failed to provide the information or documents required.
(2) HMRC may apply to the tribunal for an order requiring the person to provide the information or documents required.
(3) The tribunal may make an order under subsection (2) only if satisfied that HMRC have reasonable grounds for suspecting that the information or documents will assist HMRC in considering the notifiable proposals or arrangements.
(4) Where the tribunal makes an order under subsection (2), the person must comply with it within—
(a) the period of 10 working days beginning with the day on which the tribunal made the order, or
(b) such longer period as HMRC may direct." (FA 2004, s.310B)
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Promoter and introducer (meaning of)
Promoter: designs, approaches or makes available in the course of a relevant business
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"(1) For the purposes of this Part a person is a promoter—
(a) in relation to a notifiable proposal, if, in the course of a relevant business, the person (“P”)—
(i) is to any extent responsible for the design of the proposed arrangements,
(ii) makes a firm approach to another person (“C”) in relation to the notifiable proposal with a view to P making the notifiable proposal available for implementation by C or any other person, or
(iii) makes the notifiable proposal available for implementation by other persons, and
(b) in relation to notifiable arrangements, if he is by virtue of paragraph (a)(ii) or (iii) a promoter in relation to a notifiable proposal which is implemented by those arrangements or if, in the course of a relevant business, he is to any extent responsible for—
(i) the design of the arrangements, or
(ii) the organisation or management of the arrangements." (FA 2004, s.307(1))
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Relevant business
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"(2) In this section “relevant business” means any trade, profession or business which—
(a) involves the provision to other persons of services relating to taxation, or
(b) is carried on by a bank, as defined by section 1120 of the Corporation Tax Act 2010, or by a securities house, as defined by section 1009(3) of that Act." (FA 2004, s.307(2))
Companies: look at the relevant businesses of other group companies
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"(3) For the purposes of this section anything done by a company is to be taken to be done in the course of a relevant business if it is done for the purposes of a relevant business falling within subsection (2)(b) carried on by another company which is a member of the same group.
(4) Section 170 of the Taxation of Chargeable Gains Act 1992 has effect for determining for the purposes of subsection (3) whether two companies are members of the same group, but as if in that section—
(a) for each of the references to a 75 per cent subsidiary there were substituted a reference to a 51 per cent subsidiary, and
(b) subsection (3)(b) and subsections (6) to (8) were omitted." (FA 2004, s.307(3) - (4))
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Very wide but not unrestricted
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"[36] Whilst helpful I would analyse the position slightly differently. The definition starts with a very wide ambit indeed - any business, trade or profession is caught; but then seeks to restrict the initial wide ambit to those businesses, trades or professions which involve the provision of services relating to taxation. In my judgment the word ‘involves’ means that there must be some element of the business which provides services relating to taxation. It need not be the whole, main or dominant element of the business. ‘Provision’ merely means to make available – so the provision need not necessarily be for valuable consideration. When construing the term ‘services relating to taxation’ I think it could be argued that the term does not include actual taxation services (but only those related to taxation services), but I do not think that such a construction survives a purposive construction. ‘Related’, of course, connotes a degree of nexus or connectivity and, as I have already said, cannot mean any and all services that are tangentially related to taxation. It will always be a question of degree and each case will turn on its own facts." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
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Includes administering a tax avoidance scheme
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"[90] Section 307(2) requires an assessment of the nature of the overall trade, profession or business through which the relevant services were provided (and whether that trade, profession or business involves the provision of services relating to taxation), rather than the nature of the specific activities which took place. However, we are not here concerned with some small activity in the context of a far larger general administration business. As can readily be seen from [24] above, the administration of the Arrangements provided a very substantial part of CCL’s income for the period for which evidence was available. As a result, I consider the nature of CCL’s trade or business for the period from at least 2012 to 2015 is coloured by the services it provided in relation to the Arrangements, to the point where it could fairly be said that its core trade or business involved the provision of those services. Thus the issue boils down to the question of whether the services which CCL provided in connection with the Arrangements were “services relating to taxation”.
[91] In the context of the overall scheme of Part 7 of FA04, I consider that they were. I accept that CCL had no expertise in the area of taxation and its services were, and were characterised (both with regard to NM and with regard to participants in the Arrangements) as administration services, though it also carried out some marketing activities as summarised above. However, the phrase “services relating to taxation” is in my view sufficiently broad in meaning to cover the activity of administering a tax avoidance scheme, even when doing so without any clear knowledge of the detailed way in which it is intended to work." (Curzon Capital Limited v. HMRC [2019] UKFTT 63 (TC), Judge Poole)
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Includes providing contract management services by umbrella company
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"[38] It is said that UKCO provides two lots of services (categorised as two separate businesses by the Respondents): that of a ‘umbrella company’ service and that of a “contracts management” services. The question then becomes whether any of these services are related to taxation. Focussing, first, upon the “contracts management” element, given that this is the area 7 where arguments centred, I think much depends on the nature of the contracts being managed and the role that these contracts played in the overall arrangements.
[39] The contracts being managed in this case were pivotal to the arrangements as was UKCO’s role as whole1. The contracts in question represented the nuts and bolts of the arrangements or scheme. The arrangements simply could not exist without these contracts. What is happening, in reality, is that in “managing” the contracts UKCO was administering the avoidance scheme or arrangement. In doing so I am sure that it was providing services relating to taxation." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
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Business more than tangentially linked to taxation
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"[69(1)(c)] Independently of this, the Tribunal finds that a business of providing PAYE payroll services of the kind provided by the Respondent is a business "relating to taxation" within the meaning s 307(2)(a) FA 2004. The services provided by the Respondent were more than tangentially related to taxation (compare Smartpay at [36]). According to the Respondent's promotional leaflet, the key value of its services was said to include: "All tax and National Insurance paid, without the need for an accountant", and "One tax code, for multiple contracts which avoids unnecessary over payment of income tax". (HMRC v. IPS Progression Limited [2024] UKFTT 136 (TC), Judge Staker)
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Firm approach
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"(4A) For the purposes of this Part a person makes a firm approach to another person in relation to a proposal if the person makes a marketing contact with the other person in relation to the proposal at a time when the proposed arrangements have been substantially designed." (FA 2004, s.307(4A))
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Marketing contact
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(4B) For the purposes of this Part a person makes a marketing contact with another person in relation to a notifiable proposal if—
(a) the person communicates information about the notifiable proposal to the other person,
(b) the communication is made with a view to that other person, or any other person, entering into transactions forming part of the proposed arrangements, and
(c) the information communicated includes an explanation of the advantage in relation to any tax that might be expected to be obtained from the proposed arrangements." (FA 2004, s.307(4B))
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Substantially designed
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"(4C) For the purposes of subsection (4A) proposed arrangements have been substantially designed at any time if by that time the nature of the transactions to form part of them has been sufficiently developed for it to be reasonable to believe that a person who wished to obtain the advantage mentioned in subsection (4B)(c) might enter into—
(a) transactions of the nature developed, or
(b) transactions not substantially different from transactions of that nature." (FA 2004, s.307(4C))
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Makes available for implementation: be able to be used
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"[41] The Respondents submit that the term should be construed narrowly in the sense that making arrangements available for implementation requires that a person is able to ensure that a scheme user who wants to use the arrangements would be able to do so. I do not agree, and in this respect, I must part company with what Judge Mosedale says at paragraph 295 of HMRC v Hyrax Resourcing Ltd & Ors [2019] UKFTT 175 (“Hyrax”). To my mind ‘makes available’, in this context, means to ‘be able to be used’ or ‘to put at someone’s disposal’. There is no requirement, in my mind, to ensure that a scheme user, if s/he wants to, is able to use it.
[42] Applying this to the facts it seems to me to be clear that UKCO put the arrangements at the disposal of the scheme users. It informed scheme users about the workings of the scheme, reviewed the contract for services with UK agencies (even if in a more limited sense), sent out compliance packs to scheme users, corresponded with UK agencies about scheme users and accounts matters, corresponded with users about contracts, accounts and payments, issued payslips to users, invoiced UK agencies, and received payments from UK agencies. It matters not that some or all of this was done as an agent for IOMCO. The capacity in which UKCO acted, for these, purposes is irrelevant."(HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
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Responsible for the organisation or management of the arrangements
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"[54] HBL also appears to be significantly involved in the organisation or management of the arrangements, as HBL invoiced UK agencies on behalf of users, received payments from UK agencies on behalf of users, issued full VAT invoices to HBC in relation to the amounts HBL owed HBC (which it was required to settle by paying HBC in return for the services users
provided to end users in their capacity as HBC employees) and transferred the above funds to HBC. Without HBL’s involvement the income received would not reach HBC and be paid to the end users. The issuing of invoices to agencies is therefore crucial to the arrangements, and therefore HBL is involved in a critical part of the organisation of the arrangements.
[55] I therefore find that HBL is a promoter under s307(1)(a)(iii) and 307(1)(b)(ii)." (HMRC v. Hamilton Bradbury Ltd [2023] UKFTT 99 (TC), Judge Allatt)
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"[43] It was argued on behalf of UKCO that it simply manages contracts and payments. It does not organise or manage the arrangements and nor is it “responsible” for anything. It is, only peripherally involved in the administration of the arrangements.
[44] Such an argument is grounded in the artificial distinction drawn in this case between the ‘managing’ of contracts (which contracts I have held at paragraph 39 above are central to the working of the arrangements) and the organising and management of the arrangements. There is no material distinction to be drawn. Nor it can be said that UKCO lacked awareness of the loan element of the arrangements. I have already held at paragraph 40 above that UKCO, as an entity, had knowledge of the arrangements – including the loan element.
[45] In my judgment ‘responsible’ in this context means being credited with, blamed for or answerable for. It does not, in this context, mean having control or authority over or of the subject matter. It seems clear to me that whilst there might be an argument that because UKCO is acting as an agent it has no control or authority as to how the arrangements are organised or managed and, therefore, may not be responsible for them in that sense; it, nevertheless, can clearly be credited with the management and organisation of the arrangements - even if only as agent. Accordingly, it is responsible for the arrangements." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
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Introducer
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"(1A) For the purposes of this Part a person is an introducer in relation to a notifiable proposal if the person makes a marketing contact with another person in relation to the notifiable proposal." (FA 2004, s.307(1A))
Prescribed circumstances exception
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"(5) A person is not to be treated as a promoter or introducer for the purposes of this Part by reason of anything done in prescribed circumstances." (FA 2004, s.307(5))
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Non-notifiable proposals/arrangements
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"(6) In the application of this Part to a proposal or arrangements which are not notifiable, a reference to a promoter or introducer is a reference to a person who would be a promoter or introducer under subsections (1) to (5) if the proposal or arrangements were notifiable." (FA 2004, s.307(6))
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Notifiable arrangement
"(1) In this Part “notifiable arrangements” means any arrangements which—
(a) fall within any description prescribed by the Treasury by regulations,
(b) enable, or might be expected to enable, any person to obtain an advantage in relation to any tax that is so prescribed in relation to arrangements of that description, and
(c) are such that the main benefit, or one of the main benefits, that might be expected to arise from the arrangements is the obtaining of that advantage." (FA 2004, s.306(1))
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- Tax advantage includes not paying tax that ought to have been paid
"[68(vii)(B)] ... An "advantage" need not necessarily be a reduction of the amount of tax that a person is required by law to pay. An "advantage" (paragraph 41 above) can include an arrangement under which a person in fact pays less than the amount of tax that they are required by law to pay, and under which the underpayment is obscured. It is immaterial whether the arrangements succeed in having the effect in law that less tax is payable than would otherwise have been the case (Root2tax Ltd and Root3tax Ltd v Revenue and Customs [2017] UKFTT 696 (TC) at [45])." (HMRC v. IPS Progression Limited [2024] UKFTT 136 (TC), Judge Staker)
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Prescribed arrangements
"(1) The following arrangements are prescribed for the purposes of Part 7 of the FA 2004 (disclosure of tax avoidance schemes)—
(a) in relation to income tax, corporation tax and capital gains tax, any arrangements which fall within any description specified in a provision of these Regulations listed in paragraph (2);
(b) in relation to inheritance tax, any arrangements which fall within any description specified in a provision of these Regulations listed in paragraph (2)(a) or (c);
(c) in relation to the apprenticeship levy, any arrangements which fall within any description specified in a provision of these Regulations listed in paragraph (2)(a), (b), (c) or (e).
(2) The provisions are—
(a) regulation 6 (description 1: confidentiality in cases involving a promoter);
(b) regulation 7 (description 2: confidentiality in cases not involving a promoter);
(c) regulation 8 (description 3: premium fee);
(d) . . .
(e) regulation 10 (description 5: standardised tax products);
(f) regulation 12 (description 6: loss schemes);
(g) regulation 13 (description 7: leasing arrangements);
(h) regulation 18 (description 8: employment income provided through third parties); and
(i) regulation 19 (description 9: financial products).
(3) For the purpose only of determining whether arrangements are prescribed by regulations 6, 7, 8 and 13 of these Regulations, regulation 6 of the Promoters Regulations (persons not to be treated as promoters: legal professional privilege) shall be disregarded." (SI 2006/1543, r.5)
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(1) Confidentiality where promoter involved
"(1) Arrangements are prescribed if—
(a) any element of the arrangements (including the way in which the arrangements are structured) gives rise to the tax advantage expected to be obtained under the arrangements; and
(b) it might reasonably be expected that a promoter would wish the way in which that element of those arrangements secures, or might secure, a tax advantage to be kept confidential from any other promoter at any time following the material date.
(2) Arrangements are prescribed if it might reasonably be expected that a promoter would, but for the requirements of these Regulations, wish to keep the way in which any element of those arrangements (including the way in which the arrangements are structured) that secures, or might secure, the tax advantage confidential from HMRC at any time following the material date, and a reason for doing so is to facilitate repeated or continued use of the same element, or substantially the same element, in the future.
(2A) Cases where arrangements will be prescribed under paragraph (2) include, but are not limited to, where—
(a) a promoter does not provide to the user of the arrangements (“the user”), or prevents or discourages the user from retaining, any promotional materials, data or written professional advice relating to those arrangements; and
(b) it might reasonably be expected that the reason for doing so is to keep the arrangements confidential from HMRC in order to facilitate repeated or continued use of any element of those arrangements.
(3) In a case where—
(a) by virtue of regulation 6 of the Promoters Regulations (persons not to be treated as promoters: legal professional privilege), no person is to be treated as the promoter in relation to the arrangements; or
(b) by virtue of section 309(1) of FA 2004 (duty of person dealing with promoter outside United Kingdom), a user of the arrangements has a duty to provide prescribed information,
for paragraph (2) substitute—
“(2) Arrangements are prescribed if it might reasonably be expected that the user of the arrangements would, but for the requirements of these regulations, wish to keep the way in which any element of those arrangements (including the way in which the arrangements are structured) that secures the tax advantage confidential from HMRC at any time following the material date.” (SI 2006/1543, r.6)
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(2) Confidentiality where no promoter involved
"(1) Arrangements are prescribed if—
(a) no person is a promoter in relation to them;
(b) the intended user of the arrangements is a business which is not a small or medium-sized enterprise;
(c) any element of the arrangements (including the way in which the arrangements are structured) gives rise to the tax advantage expected to be obtained under the arrangements;
(d) it might reasonably be expected that a user would, but for the requirements of these Regulations, wish to keep the way in which that element secures the advantage confidential from HMRC at any time following the material date; and
(e) a reason for the user's wishing to keep the element confidential from HMRC is—
(i) to facilitate repeated or continued use of the same element, or substantially the same element, in the future; or
(ii) to reduce the risk of HMRC using that information to open an enquiry into any return or account which a person is required by or under any enactment to deliver to HMRC; or
(iii) to reduce the risk of HMRC using that information to withhold payment of all or part of an amount claimed separately from a return under—
(aa) section 261B of the Taxation of Chargeable Gains Act 1992 (treating trade loss etc as CGT loss); or
(bb) Part 4 of the ITA 2007 (loss relief).
(2) Arrangements are also prescribed if—
(a) paragraphs (1)(a) to (c) are met; and
(b) if there had been a promoter in relation to the arrangements, it might reasonably have been expected that they would, but for the requirements of these Regulations, wish to have kept the way in which any element of the arrangements (including the way in which the arrangements were structured) that secured the tax advantage confidential from HMRC at any time following the material date, and a reason for doing so would be to facilitate repeated or continued use of the same element, or substantially the same element, in the future." (SI 2006/1543, r.7)
​
(3) Premium fee
"(1) Arrangements are prescribed if they are such that it might reasonably be expected that a promoter or a person connected with a promoter of arrangements that are the same as, or substantially similar to, the arrangements in question, would, but for the requirements of these Regulations, be able to obtain a premium fee from a person experienced in receiving services of the type being provided.
But arrangements are not prescribed by this regulation if—
(a) no person is a promoter in relation to them; and
(b) the tax advantage which may be obtained under the arrangements is intended to be obtained by an individual or a business which is a small or medium-sized enterprise.
(2) For the purposes of paragraph (1), and in relation to any arrangements, a “premium fee” is a fee chargeable by virtue of any element of the arrangements (including the way in which they are structured) from which the tax advantage expected to be obtained arises, and which is—
(a) to a significant extent attributable to that tax advantage, or
(b) to any extent contingent upon the obtaining of that tax advantage as a matter of law." (SI 2006/1543, r.8)
​
Irrelevant whether a premium fee is actually obtained
​
"[22]...The test does not require an examination of the subjective condition of the promoter. The fact that UKCO does not receive a premium fee is neither here nor there..." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
​
Judge ability to obtain premium fee disregarding DOTAS
​
"[23] On any sensible reading, the purpose of the words “but for the requirements of the Regulations” is to preserve the status quo when one applies one’s mind to the test. That is to say that one should disregard a hypothetical promoter who has the same or a similar arrangement, but is not able to obtain a premium fee because of these regulations. The hypothetical promoter’s ability to obtain a premium fee is to be judged absent these regulations. The mischief that is sought to be prevented here is a promoter arguing that a hypothetical promoter would not be able to obtain a premium fee because the regulations (in particular the requirement to disclose the arrangements) would mean that it was not possible for the hypothetical promoter to obtain a premium fee." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
​
Loan arrangement would enable a premium fee
​
"[25] The tax advantage is the main, if not the only, benefit of the arrangements. It is only because of the tax advantage that users are willing to give up 15% of their pre-tax income by agreeing to the Hamilton Bradbury Companies withholding and retaining that amount. The amount withheld shows the size of fee that could have been obtained and that is only attributable to the tax advantage to which the transactions purportedly give rise." (HMRC v. Hamilton Bradbury Ltd [2023] UKFTT 99 (TC), Judge Allatt)
​
"[24] There was no argument that the arrangement (essentially aimed at taking outside the scope of income tax and NIC net monies paid as a loan to the scheme user) represented an “advantage” for the purposes of section 318 FA 2004. It is clear that these arrangements were expected to give rise to a tax advantage because they were intended to reduce the burden of income tax and NIC on economic activity which might, but for the loan element of the arrangement, have attracted such a charge. Nor was there any argument that the fee was chargeable by virtue of an element of the arrangement from which the tax advantage expected to be obtained arises and is either significantly attributable to the tax advantage, or to any extent 5 contingent upon the obtaining of the tax advantage per Regulation 8(2). Nor, on the facts, could there be.
[25] In my judgment it might reasonably be expected that a promoter of the same or substantially similar arrangements, but for the requirement of these regulations, would be able to obtain a premium fee." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
​
​
(5) Standardised tax product
"(1) Subject to regulation 11, arrangements are prescribed if a promoter makes the arrangements available for implementation by more than one person and the conditions in paragraph (2) are met.
(2) The conditions are that an informed observer (having studied the arrangements and having regard to all relevant circumstances) could reasonably be expected to conclude that—
(a) the arrangements have standardised, or substantially standardised, documentation—
(i) the purpose of which is to enable a person to implement the arrangements;
(ii) the form of which is determined by the promoter; and
(iii) the substance of which does not need to be tailored, to any material extent, to enable a person to implement the arrangements;
(b) a person implementing the arrangements must enter into a specific transaction or series of specific transactions;
(c) the transaction or series of transactions is standardised, or substantially standardised, in form; and
(d) either the main purpose of the arrangements is to enable a person to obtain a tax advantage or the arrangements would be unlikely to be entered into but for the expectation of obtaining a tax advantage." (SI 2006/1543, r.10)
​
- Standardised employment contracts and annuities
"[34]...Putting myself in the position of an informed observer, I am satisfied that the arrangements have standardised or substantially standardised documentation as required by Regulation 10(2)(a). The employment contracts I have seen are substantially similar, as are the Annuity Grant Agreements and the Annuity Agreements (that, as I mentioned above, drafts that were not in fact entered into). There are slight differences in some cases, in particular the Annuity Grant Agreement for Mr TR (described as an Options Agreement) has an agreed amount of Grantee’s payments, whereas they are left to the discretion of Scope in the other agreements I have seen. Also, the amount required to be paid to Mr TR for Scope to require entry into the Annuity Agreement (renamed the Option) is £1,000 rather than £500. However, I do not consider these differences to be significant. But, even if I am wrong in considering that differing document names and amounts are not relevant differences, it is clear that there are no such differences between the Annuity Grant Agreements entered by Dr AA, Mr SA, Mr RD, Mr FF and Dr NA.
[35] I am also satisfied that standardisation or substantial standardisation of the documentation was for the purposes of Regulation 10(2)(a)(i), (ii) and (iii). That is to say, I am satisfied that the documentation was standardised to enable the implementation of the arrangements, in a form determined by the promotor and without any need to tailor the documents to implement the arrangements. I reach this conclusion on the basis of the similarity of the documents, and on the similarity of the descriptions given to individual users about how the arrangements were intended to work. I have also noted that the Respondent was unable to vary the arrangements when an individual user (Mr SA) asked for them to be varied.
[36] Staying in the position of an informed observer, I am also satisfied that Regulation 10(2)(b) and (c) are both met. It is clear from the documentation supplied that each of the individual users enters into specific agreements to enable the arrangements to take place in a standard way, and the series of transactions is standardised. There is uniformity to the agreements, to the timing of the payments, to the payslips and to the explanations given to the individual users." (HMRC v. Dark Blue Umbrella Limited [2022] UKFTT 453 (TC), Judge Bailey)
​
- Loan arrangement was standardised tax product
​
"[68]...
(iv) The substance of the standardised documentation did not need to be tailored, to any material extent, to enable a person to implement the arrangements. The element in regulation 10(2)(a)(iii) is therefore satisfied. For the standardised documentation to be used in relation to any employee, it was necessary only to fill in the personal details of the individual employee, and to sign it. The Respondent accepts that materially identical documentation was used in relation to all employees. There is no evidence of bespoke changes being made to the documentation for any of the employees.
(v) In order to implement the arrangements, employees had to enter into a specific transaction or series of transactions. The element in regulation 10(2)(b) is therefore satisfied. Each employee had to enter into the employment agreement, loan agreement and bonus agreement. That amounted to three transactions. The Tribunal does not accept that regulation 10(2)(b) requires there to be a series of linear transactions; its wording indicates that a single transaction would suffice.
(vi) The transaction or series of transactions was standardised, or substantially standardised, in form. The element in regulation 10(2)(c) is therefore satisfied. Not only were the employment agreement, loan agreement, bonus agreements and payslips in standardised form in relation to all the employees (with minor immaterial variations), but so was the methodology by which the services of the Respondent was provided (see paragraphs 8-11 above)." (HMRC v. IPS Progression Limited [2024] UKFTT 136 (TC), Judge Staker)
​
"[30] Documentation obtained by HMRC indicates the arrangements are substantially similar in relation to each user, varying only in relation to the personal details of the individuals involved and the monetary sums. The documents were not tailored to any material extent to suit the individual circumstances of the different parties. Evidence provided to the Tribunal showed multiple identical loan agreements and contracts of employement, varying only in personal details and monetary sums. Whilst it may be common for employers to have standardised agreements, given that for example the Bank of England base rate, and the official beneficial loan rate varied over the period, it might be expected that there would be some variation in loan arrangements to reflect this.
...
[34] It is clear from the evidence provided by HMRC, both from ‘personal illustrations’ provided to users, and from information provided by the users to HMRC, that low taxation/increased money in their bank account every month was the main marketed benefit to this arrangement.
[35] There does not appear to be any other significant benefit to the arrangements.
[36] I agree with HMRC that the conditions for both the former and current regulation 10 hallmark apply in this case." (HMRC v. Hamilton Bradbury Ltd [2023] UKFTT 99 (TC), Judge Allatt)
​
- Excepted arrangements
​
"The following arrangements are excepted from being prescribed under regulation 10—
(a) arrangements which consist solely of one or more plant or machinery leases;
(b) an enterprise investment scheme (Part 5 of ITA 2007 and Schedule 5B to TCGA 1992);
(c) arrangements using a venture capital trust (see Part 6 of ITA 2007 and Schedule 5C to TCGA 1992);
(d) arrangements qualifying under the corporate venturing scheme (see Schedule 15 to the Finance Act 2000);
(e) arrangements qualifying for community investment tax relief (see Schedules 16 and 17 to the Finance Act 2002);
(f) an account which satisfies the conditions in the Individual Savings Account Regulations 1998;
(g) an approved share incentive plan (see Chapter 6 of Part 7 of, and Schedule 2 to, ITEPA 2003);
(h) an approved share option scheme (see Chapter 7 of Part 7 of, and Schedule 3 to, ITEPA 2003);
(i) an approved CSOP scheme (see Chapter 8 of Part 7 of, and Schedule 4 to, ITEPA 2003);
(j) the grant of one or more qualifying options which meet the requirements of Schedule 5 to ITEPA 2003 (enterprise management incentives)—
(i) together only with such other steps as are reasonably necessary in all the circumstances for the purposes of facilitating it, or
(ii) which fall to be notified to the Board in accordance with Part 7 of that Schedule;
(k) a registered pension scheme (see section 150(2) of FA 2004);
(l) an overseas pension scheme in respect of which tax relief is granted in the United Kingdom under section 615 of ICTA 1988 (exemption from tax for superannuation payments in respect of persons not resident in the United Kingdom or in respect of trades carried on wholly or partly outside the United Kingdom);
(m) a pension scheme which is a relevant non-UK pension scheme within the meaning given by paragraph 1(5) of Schedule 34 to FA 2004;
(n) a scheme to which section 731 of ITTOIA 2005 applies (periodical payments of personal injury damages);
(o) arrangements which would be prescribed by regulation 19 but for regulation 21" (SI 2006/1543, r.11)
​
(6) Loss schemes
"Arrangements are prescribed if—
(a) the promoter expects more than one individual to implement the same, or substantially the same, arrangements; and
(b) an informed observer (having studied the arrangements and having regard to all relevant circumstances) could reasonably be expected to conclude that—
(i) the main benefit or one of the main benefits which could be expected to accrue to some or all of the individuals participating in the arrangements is the provision of losses, and
(ii) the arrangements (including the way they are structured) contain an element which is, or elements which are, unlikely to have been entered into by the individuals concerned were it not for the provision of those losses, and
(iii) those individuals would be expected to use those losses to reduce their liability to income tax or capital gains tax." (SI 2006/1543, r.12)
​
(7) Leasing arrangements
"(1) Arrangements are prescribed if—
(a) the arrangements include a plant or machinery lease . . .;
(b) one of the additional conditions is met (see regulation 15);
(c) the relevant value condition is met (see regulation 16); and
(d) the lease is not a short-term lease (see regulation 17).
(2) But arrangements are not prescribed by this regulation if—
(a) no person is a promoter in relation to them; and
(b) the tax advantage which may be obtained under the arrangements is intended to be obtained by an individual or a business which is a small or medium-sized enterprise." (SI 2006/1543, r.13)
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Additional conditions
​
"(1) The first additional condition is that the arrangements are designed in such a way that one or more of the plant or machinery leases, comprised in the arrangements, are or would be entered into by—
(a) one party who has or would have a right or entitlement to claim capital allowances under Part 2 of CAA 2001 (plant and machinery allowances) in respect of the expenditure incurred on the plant or machinery, and
(b) another party who is not, or would not be, within the charge to corporation tax.
(2) A lease satisfies this condition if sub-paragraphs (a) and (b) of paragraph (1) are met, regardless of whether there are or would be (in addition to the parties mentioned in those sub-paragraphs) other parties to the lease who satisfy neither of those conditions.
(3) A party who acts merely as a guarantor under the lease is to be disregarded for the purposes of paragraph (1)(b).
(4) The second additional condition is that the arrangements include provision designed to—
(a) remove from the lessor the whole, or the greater part, of any risk, which would otherwise fall directly or indirectly upon the lessor, of sustaining a loss if payments due under the lease are not made in accordance with its terms, and
(b) do so by the provision of money or a money debt.
For the purposes of this paragraph “money” and “money debt” have the same meanings as they have in section 702(6) of ITEPA 2003.
(5) The third additional condition is that the arrangements are designed to consist of, or include—
(a) a sale and finance leaseback arrangement (within the meaning of section 221 of CAA 2001), or
(b) a lease and finance leaseback (within the meaning of section 228A(2) of CAA 2001).
The third additional condition is subject to the following paragraphs of this regulation.
(6) In a case falling within paragraph (5)(a) the third additional condition does not apply if the arrangements are designed in such a way that—
(a) the assets leased or to be leased under the sale and finance leaseback are or will be unused and not second-hand at the time when the assets are acquired or created; and
(b) the interval between the acquisition or creation of the asset and the sale of the asset under the sale and finance leaseback arrangement is not more than four months.
(7) The third additional condition does not apply if plant or machinery which is, or which the promoter expects to become, a fixture, is leased with relevant land, unless the plant or machinery is used for storage or production.
Here “used for storage or production” means used for the purposes of—
(a) storing, moving or displaying goods to be sold in the course of a trade;
(b) manufacturing goods or materials;
(c) subjecting goods or materials to a process;
(d) storing goods or materials—
(i) which are to be used in the manufacture of other goods or materials;
(ii) which are to be subjected to a process in the course of a trade;
(iii) which having been subjected in the course of a trade to process, manufactured or produced, have not yet been delivered to a purchaser; or
(iv) upon their arrival in the United Kingdom from a place outside it.
(8) But paragraph (7) does not apply (so that, accordingly, the third additional condition is met) if the arrangements are designed in such a way that—
(a) the qualifying expenditure incurred on the fixture referred to in paragraph (7) amounts or will amount to more than 50% of the aggregate value of the assets subject to the lease, and
(b) the rent payable under the lease is directly or indirectly dependent on the availability of capital allowances under Part 2 of CAA 2001 in respect of expenditure on any plant or machinery comprised in the lease.
(9) In determining the value of the assets comprised in the lease the following rules apply.
Rule 1
The value of the land subject to the lease is the market value of the lessor's interest.
Rule 2
The value of the plant or machinery subject to the lease is to be determined in the same manner as for the purposes of regulation 16(1).
(10) In this regulation—
“fixture” has the meaning given by section 173(1) of CAA 2001;
“relevant land” has the meaning given by section 173(2) of CAA 2001." (SI 2006/1543, r.15)
​
Relevant value condition
​
"(1) The relevant value condition is met if—
(a) the lower of the cost to the lessor, or the market value, of any one asset forming part of the plant and machinery leased or to be leased under the arrangements is at least £10,000,000; or
(b) the aggregate of the lower of the costs to the lessor, or the market values, of all of the assets forming part of the plant and machinery leased or to be leased under the arrangements is at least £25,000,000.
(2) For the purposes of paragraph (1) the market value of plant or machinery leased or to be leased under the arrangements is to be determined on the assumption of a disposal—
(a) by an absolute owner;
(b) free from all encumbrances; and
(c) in the open market.
(3) “Absolute owner” in the application of paragraph (2)(a) to Scotland, means the owner." (SI 2006/1543, r.16)
​
Short term lease
​
"(1) For the purposes of regulation 13(1)(d) a lease whose term is 2 years or less is a short-term lease.
But a lease is not a short-term lease if any of the following Conditions apply.
In those Conditions “L” is the lessee.
(2) Condition A is that the lease contains an option exercisable by L to extend the term so that the total term exceeds 2 years.
(3) Condition B is that at the time of the inception of the lease, other arrangements have been entered into which contemplate the extension of the lease to L which, if carried out, would extend the term of the lease so that it exceeds 2 years.
(4) Condition C is that—
(a) a person leases an asset to L under a lease that would, apart from this paragraph, be a short-term lease,
(b) the inception of that lease is on or after the date on which these Regulations come into force,
(c) at or about the time of the inception of that lease, arrangements are entered into for the asset to be leased to one or more other persons under one or more other leases, and
(d) in the aggregate, the term of the lease to L and the terms of the leases to such of those other persons as are connected with L exceed 2 years.
(5) In this regulation “inception” has the meaning given by section 70YI CAA 2001." (SI 2006/1543, r.17)
​
(8) Employment income provided through third parties
"(1) Arrangements are prescribed if—
(a) Conditions 1 and 2 are met and Condition 3 is not met; or
(b) Conditions 1, 2 and 3 are met and at least one of Conditions 4 and 5 is met.
(2) Condition 1 is met if the arrangements involve at least one of the following—
(a) a relevant third person taking a relevant step under section 554B;
(b) any person taking a relevant step under section 554C or 554D; or
(c) B taking a step under section 554Z18 or 554Z19.
(3) Condition 2 is met if the main benefit, or one of the main benefits, of the arrangements is that an amount that would otherwise count as employment income under section 554Z2(1) is reduced or eliminated.
(4) Condition 3 is met if, by reason of at least one of sections 554E to [554XA] or regulations made under section 554Y, Chapter 2 of Part 7A does not apply.
(5) Condition 4 is met if the arrangements involve one or more contrived or abnormal steps without which the main benefit in paragraph (3) would not be obtained.
(6) Condition 5 is met if the arrangements involve—
(a) a relevant step being treated as taking place; and
(b) Chapter 2 of Part 7A applying as a consequence of sub-paragraph (a).
(7) In this regulation—
(a) references to sections or Parts are to those in ITEPA unless otherwise stated;
(b) “B” has the meaning given for Part 7A by sections 554A(1)(a) and 554Z17(7) read together;
(c) “contrived or abnormal” has the same meaning as in section 207 of the Finance Act 2013; and
(d) “relevant third person” has the same meaning as in section 554A(7)" (SI 2006/1543, r.18)
​
(9) Financial products
"(1) Subject to regulation 21, arrangements are prescribed if—
(a) condition 1 is met, and
(b) it would be reasonable to expect an informed observer (having studied the arrangements and having regard to all relevant circumstances) to conclude that—
(i) condition 2 is met, and
(ii) either condition 3 or condition 4 is met.
(2) Condition 1 is that the arrangements include at least one financial product specified in regulation 20(1) (a “specified financial product”).
(3) Condition 2 is that the main benefit, or one of the main benefits, of including a specified financial product in the arrangements is to give rise to a tax advantage.
(4) Condition 3 is that a specified financial product included in the arrangements contains at least one term which is unlikely to have been entered into by the persons concerned were it not for the tax advantage.
(5) Condition 4 is that the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained.
(6) For the purposes of this regulation condition 3 is treated as not having been met if—
(a) the specified financial product includes a term requiring that it is held for a minimum period of time before it is redeemed and—
(i) section 135 or 136 of TCGA 1992 applies to the specified financial product, and
(ii) condition 3 is met only by virtue of that term; or
(b) the specified financial product includes a term whereby the issuing company can secure that the date for redemption falls before the end of the permitted period and—
(i) but for that term, the specified financial product would be an equity note, and
(ii) condition 3 is met only by virtue of that term.
(7) In paragraph (6)(b) “equity note” and “the permitted period” have the meanings given by section 1016 of CTA 2010.
(8) For the purposes of condition 4 a step is not to be treated as being contrived or abnormal if—
(a) that step involves only the transfer of an asset to which the condition in paragraph 15A(2)(b) of Schedule 7AC to TCGA 1992 applies; or
(b) that step involves only the issue of shares and—
(i) that step is taken to eliminate or substantially reduce the economic risk of holding a loan relationship or a derivative contract, or part of such a loan relationship or a derivative contract, which is attributable to fluctuations in exchange rates, and
(ii) the shares are treated for accounting purposes as a liability of the company in accordance with generally accepted accounting practice.
(9) For the purposes of this regulation, neither condition 3 nor condition 4 is treated as having been met if—
(a) the specified financial product includes a term providing for conversion into, or redemption in, a currency other than sterling, and
(b) both condition 3 and condition 4 are met only by virtue of that term." (SI 2006/1543, r.19)
​
Specified financial products
​
"(1) The financial products specified in this paragraph are—
(a) a loan,
(b) a share,
(c) a derivative contract within the meaning given by section 576 of CTA 2009,
(d) a repo in respect of securities within the meaning given by section 263A(A1) of TCGA 1992,
(e) a creditor repo, creditor quasi-repo, debtor repo or a debtor quasi-repo (within the meanings given by sections 543, 544, 548 and 549 of CTA 2009 respectively),
(f) a stock lending arrangement within the meaning given by section 263B(1) of TCGA 1992,
(g) an alternative finance arrangement within Chapter 6 of Part 6 of CTA 2009 or Part 10A of ITA 2007,
(h) a contract which, whether alone or in combination with one or more other contracts—
(i) is in accordance with generally accepted accounting practice required to be treated as a loan, deposit or other financial asset or obligation, or
(ii) would be required to be so treated by the person entering into the arrangements were that person a company to which the Companies Act 2006 applies.
(2) Paragraph (1) does not specify a financial product held within an account which satisfies the conditions in regulation 4 of the Individual Savings Account Regulations 1998." (SI 2006/1543, r.20)
​
Excepted arrangements
​
"Arrangements are excepted from being prescribed under regulation 19 if—
(a) a promoter is a participating entity, or is part of a participating group, within the meaning of section 286 of the Finance Act 2014; and
(b) HMRC has confirmed, or could reasonably be expected to confirm, to the promoter that the arrangements are acceptable transactions under the Code of Practice on Taxation for Banks (as published by the Commissioners for Her Majesty's Revenue and Customs on 31st May 2013)" (SI 2006/1543, r.21)
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Notifiable proposal
"(2) In this Part “notifiable proposal” means a proposal for arrangements which, if entered into, would be notifiable arrangements (whether the proposal relates to a particular person or to any person who may seek to take advantage of it)." (FA 2004, s.306(2))
​
Doubt as to notifiability (HMRC apply to Tribunal)
"(1) HMRC may apply to the tribunal for an order that—
(a) a proposal is to be treated as notifiable, or
(b) arrangements are to be treated as notifiable.
(2) An application must specify—
(a) the proposal or arrangements in respect of which the order is sought, and
(b) the promoter.
(3) On an application the tribunal may make the order only if satisfied that HMRC—
(a) have taken all reasonable steps to establish whether the proposal or arrangements are notifiable, and
(b) have reasonable grounds for suspecting that the proposal or arrangements may be notifiable.
(4) Reasonable steps under subsection (3)(a) may (but need not) include taking action under section 313A or 313B.
(5) Grounds for suspicion under subsection (3)(b) may include—
(a) the fact that the relevant arrangements fall within a description prescribed under section 306(1)(a);
(b) an attempt by the promoter to avoid or delay providing information or documents about the proposal or arrangements under or by virtue of section 313A or 313B;
(c) the promoter's failure to comply with a requirement under or by virtue of section 313A or 313B in relation to another proposal or other arrangements.
(6) Where an order is made under this section in respect of a proposal or arrangements, the prescribed period for the purposes of section 308(1) or (3) in so far as it applies by virtue of the order—
(a) shall begin after a date prescribed for the purpose, and
(b) may be of a different length than the prescribed period for the purpose of other applications of section 308(1) or (3).
(7) An order under this section in relation to a proposal or arrangements is without prejudice to the possible application of section 308, other than by virtue of this section, to the proposal or arrangements." (FA 2004, s.306A)
​
Duty of parties to arrangement or provide information to HMRC
"(1) Any person who is a party to any arrangements must provide the Board with prescribed information relating to—
(a) any reference number notified to him, and
(b) the time when he obtains or expects to obtain by virtue of the arrangements an advantage in relation to any relevant tax." (FA 2004, s.313(1))
Relevant tax
​
"(2) For the purposes of subsection (1) a tax is a “relevant tax” in relation to arrangements of any description if it is prescribed in relation to arrangements of that description by regulations under section 306." (FA 2004, s.313(2))
Method of providing information
​
"(3) Regulations made by HMRC may—
(a) in prescribed cases, require the information prescribed under subsection (1) to be included in any return or account which the person is required by or under any enactment to deliver to the Board, and
(b) in prescribed cases, require the information prescribed under subsection (1) and such other information as is prescribed to be provided separately to the Board at the prescribed time or times." (FA 2004, s.313(3))
Exclusion of penalties other than TMA s.98C
​
"(4) A person is not liable to a penalty under—
(a) any provision relating to incorrect or uncorrected returns made under section 98 of the Finance Act 1986 (administration of stamp duty reserve tax),
(b) Schedule 24 to the Finance Act 2007 (penalties for errors), or
(c) any other prescribed provision,
by reason of any failure to include in any return or account any reference number or other information required by virtue of subsection (3)(a) (but see section 98C of the Taxes Management Act 1970 for the penalty for failure to comply with this section)." (FA 2004, s.313(4))
HMRC power to discharge duty
​
"(5) HMRC may give notice that, in relation to arrangements specified in the notice, persons are not under the duty under subsection (1) after the date specified in the notice." (FA 2004, s.313(5))
​
No duty in prescribed circumstances
​
"(6) The duty under subsection (1) does not apply in prescribed circumstances." (FA 2004, s.313(6))
​
Allocation of reference number
"(1) This section applies in—
(a) a subsection (2) case, or
(b) a subsection (3) case.
(2) A “subsection (2) case” is a case where a person complies, or purports to comply, with section 308(1) or (3), 309(1) or 310 in relation to a notifiable proposal or notifiable arrangements.
(3) A “subsection (3) case” is a case where—
(a) notice in relation to arrangements or a proposal has been issued in accordance with section 310D (notice of potential allocation of reference number),
(b) the notice period has expired, and
(c) the person to whom the notice was given has failed to satisfy HMRC, before the expiry of the notice period, that the arrangements are not notifiable or (as the case may be) that the proposal is not notifiable.
(4) “The notice period” means—
(a) the period of 30 days beginning with the day on which the notice under section 310D is issued, or
(b) such longer period as HMRC may direct.
(5) HMRC may allocate a reference number to the arrangements or, in the case of a proposal, the proposed arrangements, subject to subsection (6).
(6) HMRC may not allocate a reference number to arrangements or proposed arrangements after the time limit for doing so.
(7) The time limit for allocating a reference number is—
(a) in a subsection (2) case, the end of the period of 90 days beginning with the compliance, or purported compliance, with section 308(1) or (3), 309(1) or 310, as the case may be;
(b) in a subsection (3) case, the end of the period of one year beginning with the day after the end of the notice period (see subsection (4)).
(8) HMRC may at any time withdraw a reference number allocated to arrangements in a subsection (3) case.
(9) The allocation of a reference number to arrangements or proposed arrangements is not to be regarded as constituting an indication by HMRC that the arrangements could as a matter of law result in the obtaining by any person of a tax advantage." (FA 2004, s.311)
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Issue of reference number where HMRC suspect notifiable
"(1) This section applies where—
(a) HMRC have become aware that—
(i) a transaction forming part of arrangements has been entered into,
(ii) a firm approach has been made to a person in relation to a proposal for arrangements, with a view to making the proposal available for implementation, or
(iii) a proposal for arrangements is made available for implementation, and
(b) HMRC have reasonable grounds for suspecting that the arrangements are notifiable, or the proposal is notifiable.
(2) HMRC may issue a notice to a person explaining that, unless the person is able to satisfy HMRC, before the end of the notice period, that the arrangements are not notifiable or (as the case may be) the proposal is not notifiable, HMRC may allocate a reference number to the arrangements or (in the case of a proposal) the proposed arrangements.
(3) But HMRC may not issue a notice under this section before the end of the period of 15 days beginning with the day on which they first become aware that the condition in paragraph (a)(i), (ii) or (iii) of subsection (1) is met.
(4) A notice under this section must be issued to any person who, on the day the notice is issued, HMRC reasonably suspect to be a promoter in relation to the arrangements or proposal.
(5) A notice under this section may be issued to any other person who HMRC reasonably suspect to be involved in the supply of the arrangements or proposed arrangements." (FA 2004, s.310D)
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Duty to notify client of reference number
"(1) This section applies where a person who is a promoter in relation to notifiable arrangements is providing (or has provided) services to any person (“the client”) in connection with the notifiable arrangements.
(2) The promoter must, within 30 days after the relevant date, provide the client with prescribed information relating to any reference number [allocated in a case within section 311(2) (or, if more than one, any [one such reference number]2) that has been notified to the promoter (whether by HMRC or any other person) in relation to—
(a) the notifiable arrangements, or
(b) any arrangements substantially the same as the notifiable arrangements (whether involving the same or different parties).
(3) In subsection (2) “the relevant date” means the later of—
(a) the date on which the promoter becomes aware of any transaction which forms part of the notifiable arrangements, and
(b) the date on which the reference number is notified to the promoter.
(4) But where the conditions in subsection (5) are met the duty imposed on the promoter under subsection (2) to provide the client with information in relation to notifiable arrangements is discharged.
(5) Those conditions are—
(a) that the promoter is also a promoter in relation to a notifiable proposal and provides services to the client in connection with them both,
(b) the notifiable proposal and the notifiable arrangements are substantially the same, and
(c) the promoter has provided to the client, in a form and manner specified by HMRC, prescribed information relating to the reference number that has been notified to the promoter in relation to the proposed notifiable arrangements.
(6) HMRC may give notice that, in relation to notifiable arrangements specified in the notice, promoters are not under the duty under subsection (2) after the date specified in the notice." (FA 2004, s.312)
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"(1) This section applies where a person is providing (or has provided) services to another person (“the client”) in connection with arrangements or proposed arrangements.
(2) The person must, before the end of the period of 30 days beginning with the relevant date, provide the client with prescribed information relating to any reference number allocated in a case within section 311(3) (or, if more than one, any one such reference number) that has been notified to the person (whether by HMRC or any other person) in relation to—
(a) the arrangements or proposed arrangements, or
(b) any arrangements substantially the same as the arrangements or proposed arrangements (whether involving the same or different parties).
(3) In subsection (2), “the relevant date” means the date on which the person has been notified of the reference number.
(4) HMRC may give notice that, in relation to arrangements or proposed arrangements specified in the notice, no person is under the duty imposed by subsection (2) after the date specified in the notice." (FA 2004, s.312ZA)
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Duty of client to notify other parties
"(1) This section applies where a person (a “client”) to whom a person who is a promoter in relation to notifiable arrangements or a notifiable proposal is providing (or has provided) services in connection with the notifiable arrangements or notifiable proposal receives prescribed information under section 312 relating to the reference number allocated to—
(a) the notifiable arrangements or proposed notifiable arrangements, or
(b) any arrangements substantially the same as the notifiable arrangements or proposed notifiable arrangements.
(1A) This section also applies where a person (a “client”) to whom a person is providing (or has provided) services in connection with arrangements or proposed arrangements receives prescribed information under section 312ZA relating to the reference number allocated to—
(a) the arrangements or proposed arrangements, or
(b) any arrangements substantially the same as the arrangements or proposed arrangements.
(2) The client must, within the prescribed period, provide prescribed information relating to the reference number to any other person—
(a) who the client might reasonably be expected to know is or is likely to be a party to the arrangements or proposed arrangements, and
(b) who might reasonably be expected to gain a tax advantage in relation to any relevant tax by reason of the arrangements or proposed arrangements.
(2A) Where the client—
(a) is an employer, and
(b) by reason of the arrangements or proposed arrangements, receives or might reasonably be expected to receive an advantage, in relation to any relevant tax, in relation to the employment of one or more of the client's employees,
the client must, within the prescribed period, provide to each of the client's relevant employees prescribed information relating to the reference number.
(3) For the purposes of this section—
(a) a tax is a “relevant tax”, in relation to arrangements or arrangements proposed in a proposal of any description, if it is prescribed in relation to arrangements or proposals of that description by regulations under section 306;
(b) “relevant employee” means an employee in relation to whose employment the client receives or might reasonably be expected to receive the advantage mentioned in subsection (2A);
(c) “employee” includes a former employee;
(d) a reference to employment includes holding an office (and references to “employee” and “employer” are to be construed accordingly).
(4) HMRC may give notice that, in relation to arrangements or a proposal specified in the notice, persons are not under one or both of the duties under this section after the date specified in the notice.
(5) The duty under subsection (2) or (2A) does not apply in prescribed circumstances." (FA 2004, s.312A)
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