HMRC’s tax avoidance promoter consultation sees it looking at the wrong end of the telescope, again

From reading the HMRC consultation “Closing in on promoters of marketed tax avoidance,” it seems that HMRC and HM Treasury are locked into a way of thinking that needs to be challenged, writes Graham Webber, tax director of WTT Group.

Three areas where HMRC has got it right  

Yes, I agree that promoters of all types of avoidance schemes that are ineffective (but legal) need to be challenged.

Yes, I agree that stronger, swifter, heavier penalties will have a deterrent effect.

And yes, I further agree that HMRC should have the power to use “stop notices” and to advertise the fact that they have done so.

These anti-promoter proposals will pass the contractor sector by

All of this, however, fails to recognise or reach the victims of many tax avoidance schemes, especially those in the contracting sector.

Much of today’s action around avoidance was born out of the film and property schemes seen in the 1990s. There, the ‘typical’ tax avoider was painted as a very well-paid individual willing to punt a part of their extortionate bonus on one or more schemes in the hope that one worked and would be leveraged enough to cover all their taxable income!

Well-advised and well-aware, makes you a well-justified target

Such people tended to be well advised by some household names from the tax industry, and in the main were very well aware of the risks should a scheme not work as advertised.

Actions against promoters of such schemes, as proposed by HMRC in the 10-chapter consultation which was announced at Spring Statement 2025, can be justified.

‘Closing in on promoters’ isn’t aligned with HMRC thinking

The above stereotype of ‘tax avoider’ has hardly moved in HMRC’s thinking, even though the consultation recognises that the majority of those now caught in schemes, fit a very different demographic.

IT and technology professionals enjoyed a very profitable time in the 1990s, up until quite recently perhaps.

But while the sparkle may have dissipated in the last five years or so, so too, it seems, has the appetite for schemes offering tax savings. We still see a few but in general, the message from the government has been delivered by HMRC with a vengeance.

And so schemes in this space are much less common than they were.

Who are tax avoidance schemes and promoters targeting in 2025/26?

No, in 2025/26, the most likely victim of a ‘disguised remuneration’ scheme is a relatively low-paid worker, perhaps on a zero-hours contract, who may not have English as their first language but whose work is crucial to the running of organisations, such as the NHS and other institutions.

We see many such people in our capacity as a tax dispute advisory.

We also see that their ability to resist HMRC challenge is severely limited by their understanding and/or resources.

HMRC -- prevention, not cure, would work wonders

So this is an area we’d like to suggest -- here to HMRC, should be a focus of the consultation (which is open for responses until June 18th 2025).

The emphasis from policymakers needs to be on prevention and not cure. And certainly not on penalties for promoters who may well be gone by the time HMRC catches up with them.

The inherently dutiful promoter? Pull the other one

Time and time again in HMRC thinking, we see a built-in fallacy that a promoter is inherently dutiful in terms of completing compliance tasks. They are not. They are, in the main, doing the absolute minimum to seem and appear to be credible and lawful while ignoring many of the things that they should be doing.

In particular, I find the consultation’s sections on DOTAS (“Expanding and Strengthening the DOTAS Regime”) to be disingenuous.

The DOTAS problem (cont.)

HMRC has never given DOTAS-related work the resources it was promised and as a result, there is almost no preventative impact for the current rules, nor we suggest revised rules.

No, HMRC instead needs to identify those areas it considers ‘high risk’ in terms of tax avoidance and to instigate (a paid-for-by-the-taxpayer) process in which a certificate of compliance can be applied for and renewed annually.

How would a certificate of HMRC compliance for tax schemes work?

Potential users of schemes -- contractors for example or increasingly nowadays zero-hours contract workers -- need to be educated into asking for and receiving such a certificate. It would be a condition of joining a scheme.

If a promoter cannot obtain a certificate for any reason, then HMRC, by all means -- apply your penalties and fines. If a promoter applies and fails to obtain a certificate, they move to the top of the list for enquiry. If they apply and are successful, everybody wins.

HMRC is persisting in looking through the wrong end of the telescope and until that changes, they are ministers preaching to the choir.