Stop Notices Issued by HMRC | How They Target Tax Avoidance Schemes
Stop Notices are issued by HMRC instructing promotors of tax avoidance schemes to stop selling or promoting them. This forms part of HMRC’s broader efforts to combat tax avoidance schemes and make it more difficult for taxpayers to become involved with them.
The Promoters of Tax Avoidance Schemes regime enables HMRC to publish information about promoters of tax avoidance schemes that have been made subject to a Stop Notice and to provide details once the Notice has been sent.
Naz Maqsoom of KANGS outlines the nature of Stop Notices
The Relevant Legislation
The Finance Act 2021 and The Finance Act 2024 extend the powers of HMRC.
The Finance Act 2021, Schedule 30, part 1, section 236A provides that:
An authorised officer may serve a person with a Stop Notice if it is suspected that the recipient promotes, or has promoted, arrangements or proposal of arrangements specified in the Stop Notice.
The authorised officer will have regard to a number of circumstances including where:
- the arrangements mirror those which have previously been targeted,
- the arrangements are, or are likely to be, marketed as offering a tax advantage, but it is more likely than not that they cannot be delivered,
- HMRC lacks sufficient information to assess a scheme, often due to non-compliance with information notices,
- the promoter is already subject to a Conduct Notice or Monitoring Notice under the POTAS rules.
The Finance Act 2024 introduces two criminal offences for failure to comply with Stop Notices.
It provides that it is a criminal offence:
- for a person to promote a scheme covered by a Stop Notice, without reasonable excuse,
- where a recipient of a Stop Notice fails to pass on the Stop Notice to a person subject to it and that person subsequently promotes a scheme contrary to the regulations.
A promoter who fails to comply with a Stop Notice also faces a range of substantial penalties which can amount to £1 million in extreme cases.
Who Can Issue a Stop Notice?
Only an Authorised Officer (AO), who is a senior HMRC official outside of the counter-avoidance business unit, can issue a Stop Notice. This is a deliberate governance safeguard designed to ensure objectivity.
The AO must satisfy two key thresholds:
- Suspicion that a person is promoting (or has promoted) a tax avoidance arrangement.
- Belief that one of two combinations of statutory conditions is met.
Importantly, ‘suspicion’ does not require concrete proof only that the AO believes there's a real (not fanciful) possibility that the relevant facts exist, as supported by the legal definition in R v da Silva.
What Are the Effects of a Stop Notice?
Upon the receipt of a Stop Notice from HMRC:
- the promoter must stop selling the specified scheme,
- the promoter must pass a copy to associated persons also subject to the Stop Notice who must also stop selling the specified scheme,
- all those persons subject to the Stop Notice must inform HMRC of all the people to whom they have promoted and any they continue to promote it to,
- the persons subject to the Stop Notice must advise all clients and intermediaries, provide them with a copy and advise of its effects.
How to Challenge a Stop Notice?
Recipients of a Stop Notice may request that it is withdrawn upon the grounds that the person making the request:
- does not intend to promote, and has not promoted, arrangements or proposals falling within the description specified in the Stop Notice,
- considers that the requirements allowing the service had not been met,
- considers that there are other reasons for the Stop Notice to cease to have effect.
Evidence must be provided to support the request.
If HMRC refuses the request, the person making it may:
- submit an appeal within thirty days,
- request suspension of the Stop Notice pending the outcome of the appeal.
A Stop Notice remains in effect throughout the appeal process unless formally suspended.
How Can We Assist?
As HMRC continues to investigate tax avoidance schemes at an ever-increasing rate, greater vigilance is required by those promoting such schemes and also taxpayers considering involvement in them to ensure that the very strict compliance regulations are being observed.
HMRC advises that tax avoidance schemes generally do not work and should be avoided.
At KANGS our solicitors have comprehensive knowledge of tax laws and regulations of every nature. We routinely advise clients, both corporate and individuals, upon HMRC investigations and regularly conduct negotiations with HMRC to achieve effective and satisfactory resolutions to tax disputes.
If you receive any communication from HMRC suggesting enforcement action or legal proceedings, it is crucial to obtain expert legal advice without delay. Our experienced team at KANGS is here to help, do not hesitate to get in touch using the contact details below. We look forward to assisting you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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