HM Revenue and Customs has updated its guidance on the tests to be applied to determine whether a tax avoidance scheme disclosure is required from someone who promotes or uses an arrangement designed to give a tax or national insurance advantage.

Under the Disclosure of Tax Avoidance Schemes (DOTAS) regime, promoters and users of schemes that contain defined hallmarks of avoidance are required to notify HMRC. This helps HMRC identify cases that it considers need to be investigated and challenged. The DOTAS regime also underpins the Accelerated Payment regime, which the Government introduced to ensure that disputed tax sits with the Exchequer during the investigation of an avoidance scheme.

New regulations came into force on February 23, 2016, amending the hallmarks and their scope. These regulations amended the standardized tax product hallmark; amended the loss schemes hallmark; and created a new financial products hallmark.

The new financial products hallmark covers arrangements including a financial product:

• Where the financial product includes terms unlikely to have been entered into             were it not for the tax advantage, or
• Where the arrangements includes contrived or abnormal steps without which             the tax advantage could not be obtained.

The confidentiality hallmark (where there is a promoter involved) and the premium fee hallmark have been extended to include arrangements that might be expected to enable a person to obtain an advantage in relation to inheritance tax.