DOTAS and Jersey and Jersey’s enforcement of such matters

On 27^th march 2019 HMRC £40 million announced its victory against tax avoidance promoters – and as many readers will remember the scheme relied on a Jersey trust

• The scheme in question was promoted by Hyrax was a disguised remuneration avoidance scheme which worked by paying scheme users in loans so they could avoid paying Income Tax and National Insurance on their earnings.
• The Scheme users were paid just enough to comply with the National Minimum Wage.
• The rest of their income was made up in loans which were transferred to an offshore trust in Jersey.
• The amounts received under loan agreements were not declared as income on the scheme users tax return, meaning they didn’t pay tax on all their earnings.
• Read the full story - https://www.comsuregroup.com/jersey-trust-named-in-non-disclosed-dotas-scheme-during-hmrc-victory-against-tax-avoidance-promoters/ .

In revisiting this story 7 months later, there has not been any news as to the behaviour of the Jersey Trustees and associated parties.

With this silence one is left with the question about Jersey and its enforcement of the facilitators of such schemes.  If you revisit the statements made in 2012 and 2014 this silence seems to be surprising ad this type of behaviour it seems was something that Jersey has wanted to stamp –

on 21 JUNE 2012, Chief Minister, Senator Ian Gorst, said:

Jersey has held the view for many years that our reputation as a successful international finance centre should be built on the range and quality of the financial services offered to the world at large, alongside a firm political commitment to comply fully with all relevant international standards.

There is no wish or need to accommodate or give encouragement to those who seek to involve Jersey in aggressive tax planning schemes to avoid UK tax.

Whilst it is of course for the UK to decide what steps it wishes to take to limit the ability of UK residents to engage in tax avoidance, we will continue to be clear that Jersey does not need nor does it wish to be associated with aggressive tax planning schemes of the kind to which recent publicity has been given in the UK press. I have every intention of ensuring to the best of my ability that this message is received, understood and acted upon by all concerned.”

The above was followed up with a further Statement from The Chief Minister and the Treasury Minister Statement on abusive tax schemes dated 29 JULY 2014 - http://www.jerseyfsc.org/pdf/CMD-Abusive-Tax-Statement-20140729.pdf

“With effect from 1st of October 2014, we expect service providers to ensure that they identify if any new business they take on will facilitate the use by their client of a tax avoidance scheme registered under DOTAS, or are of the view that they are involved in a transaction which forms part of a scheme which has a DOTAS reference number, and document this accordingly (including confirmation of compliance with DOTAS reporting requirements) as part of their business take-on procedures.

We are pleased the JFSC will monitor this as part of its assessment of service providers’ compliance with the regulatory requirement to organise and control their affairs effectively and to maintain adequate risk management systems.

Jersey Finance will also be consulting members in relation to a proposed issuance of guidance notes expanding on the principles advocated here in relation to abusive tax schemes and we encourage all members to engage with this.

To assist in the effective implementation of these actions we have been working with HMRC to ensure providers do not contravene HMRC’s DOTAS rules and to consider what information would be of assistance in identifying and responding to abusive tax planning schemes with which Jersey may have some involvement.

Jersey will work closely with HMRC going forward to identify ways in which we can better collaborate with them on tax information exchange on complex international tax avoidance and structures.

DOTAS reminder

1. DOTAS was introduced in 2004 and has been strengthened and broadened since its introduction to keep pace with the ever-changing tax avoidance landscape.
2. It covers tax avoidance involving: Income Tax, Capital Gains Tax, Corporation Tax, National Insurance contributions, Stamp Duty Land Tax, Inheritance Tax and the Annual Tax on Enveloped Dwellings.
3. DOTAS relies on ‘hallmarks’ to describe what has to be disclosed. HMRC keeps these ‘hallmarks’ under review and they have been regularly updated and strengthened since DOTAS was introduced.
4. DOTAS is a self-assessment regime – the promoter must consider the scheme it is developing and disclose it to HMRC if it meets any of the hallmarks.
5. The forms that promoters and employers are required to use make it clear to the recipient that they are ‘involved in a Disclosed Tax Avoidance Scheme’.
6. Promoters are required to give scheme users the tax avoidance ‘Scheme Reference Number. This doesn’t mean the scheme has been ‘approved’ or that the arrangements work. In fact, scheme users are being put on notice that it is likely HMRC will want to investigate their tax affairs.
7. Read the full DOTAS guidance. https://www.gov.uk/guidance/disclosure-of-tax-avoidance-schemes-overview

Read the full story here