Detecting tax avoidance early is a key strand in HM Revenue & Customs' (HMRC’s) anti-avoidance strategy. The Disclosure of Tax Avoidance Schemes (DOTAS) rules enable the government to react quickly to close loopholes by changing the law, sometimes within days of the disclosure being made.
The DOTAS rules mean that HMRC can immediately put resources in place to conduct intensive investigations into avoiders’ tax returns, and so far they have helped to protect billions of pounds of tax. HMRC regularly reviews the DOTAS rules to make sure that they reflect changes in the market for tax avoidance schemes.
Tax avoidance scheme promoters have to give HMRC early information about schemes which fit certain 'hallmarks'. The promoter also has to provide HMRC at quarterly intervals with details of any clients who have used their avoidance scheme.
In addition, anyone using a tax avoidance scheme that falls within the DOTAS rules has to tell HMRC about it, usually by including a Scheme Reference Number (SRN) on their tax return, or on a special form, if they don't complete a return. This along with the information from the promoter allows HMRC to identify tax avoiders. Promoters and users who do not comply with the DOTAS rules face substantial penalties.
HMRC never approves tax avoidance schemes. The fact that a scheme has been disclosed and has been given a reference number simply means that a promoter has complied with their obligations under the DOTAS rules.
Every six months HMRC publishes statistics showing the number of disclosures made under these rules.
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