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Published on 12 January 2024

Finance Bill briefing: Clause 32 and Schedule 13: Disqualification for promoting tax avoidance

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Clause 32 and Schedule 13 introduce a new power, which allows His Majesty’s Revenue and Customs (HMRC) to apply to the court for a disqualification order. This is in relation to directors and other persons who control or exercise influence over a company involved in promoting tax avoidance and operating against the public interest.

The words 'TAX AVOIDANCE', a person holding up a red card and a hammer and gavel.
LITRG creation / Canva.com

The proposal to give HMRC a new power here is, in many ways, understandable given the problems that there are with fraud, tax avoidance, disguised remuneration and certain umbrella companies. However LITRG’s response to HMRC’s consultation on ‘tougher consequences for promoters of tax avoidance’ also highlighted a concerning, and growing, problem of individuals being recruited via social media to act as stooge directors to front umbrella companies that are not compliant with tax law.

These individuals are likely to be attracted by the fees on offer for agreeing to act as a director, but are not involved in the running of the company and so do not exercise any control or influence over it and are simply paid to forward on correspondence. More broadly, they may have no understanding or experience of a director’s role and will not realise they are leaving themselves exposed to being fined, or to criminal prosecution.

While we know HMRC are ‘alive’ to the existence of stooge directors, some comments they have made suggest that they consider it a relatively abstract or niche wrinkle. Yet it is very important that HMRC understand it is a ‘real’ issue. We have therefore produced a briefing for MPs as part of the Finance Bill debates setting out the nature and scale of the issue as per evidence we have found. Our briefing seeks commitments from HMRC and proposes an amendment to the legislation.

Our response can be found here.

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