What contractors can take from HMRC’s ‘Closing in on tax avoidance promoters’

It’s odd to me that “contractors” aren’t specifically named as one of the parties that HMRC wants to hear from in response to its consultation unveiled at Spring Statement 2025, “Closing in on promoters of marketed tax avoidance,” writes former tax inspector Carolyn Walsh.

If I were HMRC in this consultation, I’d have prioritised contractors (cont.)

Contractors have been so heavily targeted by promoters that they probably deserve to be prioritised, or at least called out to, as a party to provide evidence about what “Closing in…” on promoters should involve to be effective.

Calling all individuals who’ve used arrangements which seek to avoid tax

The nearest HMRC comes to name-dropping arguably those who’ve had the most (unenviable) contact with promoters is when it says the government would “welcome views” from “individuals who may have received marketing material, taken advice, or used arrangements which seek to avoid tax.”

As to the “may” have received marketing material, contractors definitely are in receipt of such written peddling. But does the tax office really want to hear from every individual who “may” have a scheme promoter’s tax ruse literature in their inbox?

An intelligence-led request

The answer is ‘Yes.’ In fact, the reasoning for asking taxpayers to inform the Revenue about promoter marketing material received is to gain intelligence.

HMRC is very aware of the ability of providers of tax avoidance schemes to sidestep any new legislation (including legislation that will result from “Closing In…”). Therefore, our taxman needs to be on his toes to meet any new challenges to the government’s envisioned measures. 

Actions must speak louder than these words from HMRC

Hopefully, HMRC’s actions speak louder than its words.

And although this 10-page consultation, open until June 18th, is my focus here, the action against avoidance promoters isn’t being taken in a bubble.

N.B. I am aware that not everyone thinks my old employer does any “joined up thinking,” but here I think the cumulative effect could be good, intentional or not.

Undergoing a compliance check can be stressful -- HMRC

Consider, for example, that currently, taxpayers who use tax avoidance schemes bear the burden of repaying any unpaid tax and NI contributions. Well, HMRC says in its ‘Closing in on promoters’ consultation that it knows that ‘undergoing a compliance check and facing a large tax bill can be stressful.’

Fortunately, the newly proposed measures against promoters -- in conjunction with the transfer of umbrellas’ PAYE liability to agencies (effective from April 2026) -- should remove some of the risks and financial burdens, simply thanks to fewer people being referred to avoidance promoters. 

Fewer referring agencies = fewer avoidance promoters and products, surely

My hope is that there will be far fewer avoidance scheme promoters when they are deprived of recruitment agencies (and other parties) today willing to refer ‘business’ to them.

In turn, there should be a reduction in the products and services used to enable these dodgy schemes, partly because any scheme promoters who haven’t already relocated to Dubai or wherever, will be off and running before HMRC gains access to the bank statements.

See the consultation’s ‘PFIN’ proposal for more on bank statements.

Closing In On Promoters of Marketed Tax Avoidance: three aims

Overall, this picture I’ve painted appears to be the government’s vision, at least to some extent.

Bear in mind, it says in ‘Closing in on promoters’ that the government is consulting on a package of measures which has three prongs, and is intended to:

1. Tackle all elements of tax avoidance activity by strengthening penalties and sanctions, and;
2. Denying promoters access to the products and services they need to run their schemes, and;
3. Forcing them, connected parties and even banks to provide more information about their activities to HMRC.

Sanctions, sanctions, sanctions

To these three noble ends, new criminal sanctions are proposed which are also to be extended to connected and relevant parties with strong sanctions for non-compliance (where criminal sanctions are not relevant).

Furthermore, HMRC’s “Closing in…” says the Disclosure of Tax Avoidance Schemes (DOTAS) penalty legislation may be changed to allow HMRC to determine the penalties directly. The result? Promoters would face consequences for non-compliance with DOTAS much sooner.

Introducing Promoter Action Notice (PAN)…

Elsewhere in the consultation, a new Promoter Action Notice (PAN) is outlined to require businesses to stop providing products or services to promoters and enablers of tax avoidance where those products or services are connected to the promotion of avoidance.

And “relevant businesses” could be banks and other providers of financial services. But it could also be employment agencies, insurance businesses and businesses that promoters use to advertise (including social media businesses). See the consultation’s questions 11, 12 and 13 if you’ve got a view to share on PANs.

What is a Connected Parties Information Notice (CPIN)?

The government may also introduce a targeted Connected Parties Information Notice (CPIN) which would compel persons that HMRC suspects to be connected to the promotion of a marketed tax avoidance scheme to provide relevant information and documents.  

See Questions 33-36 if the idea of a CPIN resonates with you.

Another new HMRC acronym to fight avoidance: ‘PFIN’

Based on the Financial Institution Notice (FIN), the government now proposes a ‘PFIN’ (briefly mentioned earlier).

A Promoter Financial Institution Notice would allow HMRC to obtain access to any avoidance promoters’ financial or banking data without approval from the independent tribunal.

What HMRC means by ‘best supporting’ 36,000 tax avoidance scheme users

The consultation’s publication on March 26th coincides with HMRC’s latest data (2022 -2023,) showing that approx. 36,000 individuals are using a tax avoidance scheme.

And most of those were via an umbrella company-esque scheme, which are the arrangements that get into trouble with the taxman regularly.  

In the ‘Closing in on promoters’ consultation, HMRC asks how it can best support these taxpayers.

In essence, that’s ‘taxman-speak’ for wanting to know how the Revenue can best get these 36,000 people to repay the tax owed, and help them avoid tax avoidance schemes in future.

Obtaining reliable information pre-Revenue radar is key

While the first aim will strike a chord with critics of Labour’s now-closed Loan Charge Review, my view is that the only way to achieve both of these aims is to invest in a more approachable way for individuals to get the right information before HMRC gets involved.

The Citizens Advice Bureau has AdviceNet, a subscription service for providers of pro bono services to the public.

The case for an NDPB to provide advice that HMRC investigators cannot

Well, if there were a Non-Departmental Public Body to provide tailored and unbiased advice that HMRC investigating officers cannot, it would inevitably lead to individuals moving away from problematic schemes and if necessary, repaying liabilities years sooner. In turn, that would save interest and penalties from mounting up and further in turn, save the tax department millions in compliance activity.

Such an ‘NDPB’ (another acronym; sigh) would solve a massive part of the problem outlined in the consultation document, leaving HMRC to spend its budget dealing with only the most difficult and entrenched cases.

Two other HMRC consultations were unveiled at Spring Statement 2025 (adding up to a helluva lot of taxing questions)

I acknowledge that an NDPB isn’t even one of the questions asked in “Closing In On Promoters of Marketed Tax Avoidance Schemes.”

My idea doesn’t get a look-in, either, in the 33 questions asked in the second HMRC consultation announced at Spring Statement 2025, “Enhancing HMRC’s powers: tackling tax advisers facilitating non-compliance.” Nor does an NDPB feature in “Reform of Behavioural Penalties,” the third HMRC consultation unveiled at Spring Statement. It asks just seven questions. By contrast, “Closing in on promoters…” asks a massive 63 questions, making extremely clear where HMRC’s legislative intent lies.