Case Number: TC09714
Decided on the papers
Appeal reference: TC/2023/01042
INCOME TAX – NATIONAL INSURANCE CONTRIBUTIONS – HMRC’s application for penalties under Section 98C(1)(a) and (2)(a) Taxes Management Act 1970 – whether Respondent company promoter of notifiable arrangements –yes - whether failure to comply with disclosure obligations –yes - whether reasonable excuse for failure – no - calculation of penalties – statutory maximum? – no – increase to £1m? – relevance of SRN - yes
Judgment date: 9 December 2025
Decided by:
TRIBUNAL JUDGE NIGEL POPPLEWELL
Between
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Applicants
and
WS VISION LTD (IN LIQUIDATION)
Respondent
The Tribunal determined the application on 26 and 27 November 2025 without a hearing under the provisions of Rule 29 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 having first read the Notice of Application dated 27 July 2022, with a bundle of documents in support, the witness statements of Officer Jack Lloyd and HMRC’s skeleton argument dated 24 October 2025
DECISION
INTRODUCTION
This application concerns the disclosure of the tax avoidance schemes (“DOTAS”) provisions set out in Part 7 of the Finance Act 2004 (“FA 2004”) and regulations made thereunder. It is the applicants’ (or “HMRC”) view that the respondent (WS Vision Ltd (in liquidation)) (“WSV” or “the company”) is a promoter of notifiable arrangements which should have been notified, by it, to HMRC, but which have not been so notified.
They have applied to this Tribunal (“the application”) for a penalty to be imposed upon WSV for that failure, under Section 98C(1)(a) and (2)(a) of the Taxes Management Act 1970 (“TMA 1970”).
The issues to be decided by the FTT in this application are:
Was WSV a “promoter” of “notifiable arrangements” as defined by sections 306 and 307 FA 2004?
If so, did WSV fail to comply with its obligations under section 308 FA 2004?
If so, does WSV have a reasonable excuse for its non-compliance?
If not, what quantum of penalty is WSV liable to pay?
HMRC describe the notifiable arrangements (“the arrangements”) as “Enhanced PAYE Option” arrangements, which in their view operate, broadly speaking, in the following way.
WSV provided services to individuals who either held or who were about to start a contract with an end-user or recruitment agency. Those individuals would become employed by the company and their contracts assigned to the company. The employee’s remuneration would be paid in two tranches. One by way of salary subject to PAYE, and a second amount paid by way of a loan on account of bonus payments to which the employee might have or become entitled.
The ostensible advantage is that the employee is taxed only on the salary element and not on the loan element.
For the reasons given later in this decision I have decided that the arrangements are notifiable; WSV was a promoter of those arrangements; it failed to disclose those arrangements to HMRC for which it has no reasonable excuse; accordingly, it is liable to a penalty.
BURDEN OF PROOF IN THESE PROCEEDINGS
The onus of proof is on HMRC to satisfy the FTT that WSV was a promoter of notifiable arrangements, and (if so) that it failed to comply with its obligations.
If the FTT is satisfied of both of those aspects, then the onus is on WSV to satisfy me that it had a reasonable excuse for its non-compliance.
If WSV does not satisfy the FTT that it had a reasonable excuse, then the onus is on HMRC to satisfy the FTT as to the quantum of the penalty.
The burden in all aspects is the civil standard of the balance of probabilities.
THE LAW
I set out the relevant law later in this decision when I deal with the four issues in detail.
However, in summary, the DOTAS regime which was described by Green J in R (on the application of Walapu) v Revenue and Customs Commissioners [2016] EWHC 658 (Admin), [2016] STC 1682 (at [11]-[12]) operates in the following way:
“11. The Disclosure of Tax Avoidance Schemes (“DOTAS”) regime was introduced by Part 7 of the Finance Act 2004 entitled “Disclosure of Tax Avoidance Schemes”. Pursuant to these provisions certain persons, normally the promoters of tax avoidance schemes, were required to provide HMRC with information about “arrangements” and “proposals for arrangements” (i.e. the tax avoidance schemes): where that arrangement or proposal might be expected to provide a person with a tax advantage in relation to a specified tax; where the tax advantage might be expected to be the main benefit, or one of the main benefits, of using the scheme; and, where the scheme fell within certain descriptions contained within the Regulations. There have been changes to the Regulations since 2004 and the scheme now in force was introduced in 2006.
12. In circumstances where a scheme is notifiable the promoter is required to provide specified information to HMRC. The obligation to notify normally accrues within 5 days of the marketing of the scheme or the making of the scheme available to clients for implementation. HMRC may issue a Scheme Reference Number (“SRN”). If so the promoter is required to pass the SRN on to the scheme users who, in turn, are obliged to notify HMRC of their use of the scheme. They do this normally by including the SRN upon their tax return. This enables HMRC to identify the users of a particular scheme”.
THE EVIDENCE AND THE ARRANGEMENTS
I was provided with two bundles of documents, one dated 27 July 2022, and the second dated 24 October 2025. I was also provided with two witness statements of Officer Jack Lloyd (“Officer Lloyd”), dated 25 July 2022 and 22 October 2025. From these documents I find as follows:
The company was incorporated in the UK on 17 May 2016. Its sole director and shareholder was Warren Michael Spencer (“Mr Spencer”). It traded as Peerless Pay Ltd.
On 21 April 2020, the company entered creditors voluntary liquidation.
The notes of the creditors virtual meeting of 21 April 2020 recorded, inter alia that Mr Spencer had stated: A firm called Calligraphy, which been recommended by a friend in the industry, designed the scheme; the administrative functions (PAYE returns, VAT was payslips) were done by a company called Outsourced Ltd based in Liverpool; this was done after the financial information has been compiled by Invoke Accounts Ltd, based on the Isle Of Man; the partner recruitment agencies were contacted by relationship managers at Outsourced Ltd who agreed the contract terms; the company records were held by Invoke Accounts Ltd; no management charges were paid to Calligraphy, but fees were paid to Outsourced Ltd and Invoke Accounts Ltd for accounting functions; he had been in the recruitment industry before and was able to contact new people to generate business; Invoke Accounts Ltd and Outsourced Ltd had limited access to the company’s bank account to which he had full access.
Following communications between Officer Lloyd and the liquidators, on 15 January 2021, Officer Lloyd received an email from the liquidators confirming that they had submitted form AAG1 to HMRC in respect of the arrangements.
That AAG1 records the arrangements as being “The users of the scheme would receive their gross contract value in two separate payments. The first element was a salary. This was generally NMW at around £60 to £70 a day. The balance of the contract value was in the form of a loan. It did not go through PAYE and was made as a separate payment. A tax advantage arose as the loan element was not “earnings” and therefore not subject to PAYE or NIC”.
In an email dated 3 November 2017, the arrangements are described to a potential end user that “…You will always receive 81% or more because you are only paying taxes on the salary part which is set at £300 per week to ensure that HMRC are paid the required legal salary taxes. Therefore anything above that will ensure that you are paid tax-free under the Contract Advance Agreement and should increase it further should you do any more hours. The Loan is a private arrangement which is ongoing [of] five years and is in lieu of a bonus. As it is highly unlikely that you will ever reach your bonus, then after the five years the loan is written off...”.
The arrangements were described as comprising the following steps:
Step 1
The individual who stands to benefit from the scheme (the “user”, or “theemployee”) enters into a contract of employment with the company. The sample in the bundle suggests that the employee was paid a basic wage of £70 per day and would also be entitled to receive a bonus from time to time based on performance.
Step 2
The employee enters into a loan agreement with the company. The sample loan agreement in the bundle declares that the company lends £250,000 to the employee for a five year term, interest free. The employee is entitled to drawdown that sum during the first year of the agreement or thereafter as agreed between the parties. The consideration for granting the loan includes a covenant by the employee to repay it on the fifth anniversary date and to pay a “Premium” to the company on that date, that premium being a cash sum equivalent to the lesser of 18% of the £250,000, and 18% of the amount drawn down from that amount by the first anniversary of the agreement. Security for the loan was provided by a lien over any bonus to which the employee might become entitled.
Step 3
The company would then enter into an agreement with an agency for the provision of the employee’s services by that agency to the agency’s end user clients. HMRC do not have a copy of any such contract.
Step 4
The agency would then enter into a contract with the end user client for the provision of the employee’s services. HMRC do not have a copy of any such contract.
Step 5
The end users would obtain a timesheet from the agency or end user client and email the completed timesheet to the agency, client, and to the company. The company then invoiced the agency (or client) and received from the agency or the client, the invoiced payments. This is evidenced by an email from the company to an end user dated 2 May 2018, and an invoice for professional services of an end user to the client demonstrating that the payment should be made to the company.
Step 6
The documentary evidence shows that payments were then made to end users in two tranches. Firstly, salary payments made under deduction of PAYE and NICs. Most user’s gross salaries were between £300 and £350 per week for a five day week and £140 for a two day week. HMRC’s records show that most users were paid between £1,400 and £1,600 per month. This is in line with the national minimum wage rates.
Step 7
Further payments were made by advances or loans in anticipation of future earnings and/or bonuses under the contracts between the end user and the employee. The documentary evidence shows that these payments were described as “Letter of Credit Advice”. The evidence shows that they were received into the sample users bank account.
The payslips and bank statements of an employee who undertook a six week contract show that for the first week he received one payment from the company of £1,010.99 from gross invoiced fees of £1,721.25. The tax and NICs were £466.68. A £20 “umbrella fee” was also deducted.
Those documents show that the employee was receiving a gross salary of £350 but would receive a lesser net amount after deduction tax and national insurance, (for example, £234.41 on 13 June 2018). And would also receive a second amount from the company (for example £1,046.12 on 13 June 2018).
A schedule (spreadsheet) provided to the company by an end user shows loan amounts being paid to that end user as well as salary. For example, a loan amount of £1,250 was paid in respect of a five day period of working in February 2018 for which the salary before deductions was £350 (and after deductions it was £279.50). In a subsequent period in May 2018, a loan of £8,420 was paid, the corresponding salary being £886.35.
This spreadsheet shows that the end user had been paid between (round figures) 76% and 68%, by way of salary and loan amounts, of the total amounts received from the end user.
In a letter to an end user dated 29 April 2019, the end user was told by the company that “I obviously can’t advise you, but what we suggest is that you reply to the letter with our Contract of Employment attached and payslips, which will correlate to the £350 a week/£1500 a month. You have received no other non-taxable income from us, as the agreement shows, this is a loan where the contract fully intends that it is a repayable form of income, and thus, no tax needs to be paid on it”.
In an email to an end user dated 19 March 2018, the company states that “you are on a fixed fee of 13% as per your agreement with Compare the Umbrella”.
In an email dated 30 August 2018, an end user indicated to the company that “I wasn’t aware that [the company] charge[d a] 20% fee”.
In an email to the company from an end user dated 27 April 2019, that end user complains that “your firm got 15% of my wages to … run my affairs”.
DISCUSSION
Were the arrangements notifiable arrangements?
HMRC submit that the arrangements were notifiable under section 306 (1) (a) to (c) FA 2004.
Section 306 provides:
Meaning of “notifiable arrangements” and “notifiable proposal”
In this Part “notifiable arrangements” means any arrangements which—
fall within any description prescribed by the Treasury by regulations,
enable, or might be expected to enable, any person to obtain an advantage in relation to any tax that is so prescribed in relation to arrangements of that description, and
are such that the main benefit, or one of the main benefits, that might be expected to arise from the arrangements is the obtaining of that advantage.
In considering whether there is a tax advantage, I am grateful for the comments made by Judge Mosedale in Hyrax (HMRC v Hyrax Resourcing Ltd and others [2019] UKFTT 175 (“Hyrax”). She considers the definition of tax advantage at [180] ff, concluding, at [200]:
“200. In conclusion, I find that the scheme gave, or was expected to give, rise to a tax advantage because it was intended to avoid or reduce the charge to tax on salary which would otherwise have been received by scheme users, had they not adopted the scheme and received equivalent sums in an economically similar, but legally distinct form, of small salary and large loans which were not expected to be repaid (at least not in their lifetime)…..”
I have no hesitation in saying that the arrangements fall within subparagraphs (b) and (c) of the foregoing. It is clear from the evidence that the main benefit that was expected to arise from the arrangements was the reduction of employment tax which would otherwise have been payable on the sums earned by the user for the services rendered to the end client. Those sums were earned by that user in their capacity as an employee, and as recognised by WSV, in the absence of the implementation of the arrangements, the user would have been liable to tax and NICs on the full amount of the payments made by the end user.
The main or one of the main benefits which was expected to arise from these highly artificial and contrived arrangements was to reduce that amount of tax by splitting the remuneration between taxable salary and non-taxable loan.
Whether this works or not is a matter of tax law is largely neither here nor there for the purpose of this decision. I happen to think that they do not on the authority of RFC 2012 plc (formerly the Rangers Football Club plc) v Advocate General for Scotland [2017] UKSC 45.
What matters is the benefit which was expected to arise from the arrangements. And that benefit was a tax advantage. It was to pay, in the non-taxable form of a loan, salary which would otherwise have been paid under deduction of tax and NICs.
The more difficult question is whether those arrangements fall within a description prescribed by the Treasury by regulations.
It is HMRC’s submission that they are so prescribed by regulations 8, 10, 18 and 19 of the Tax Avoidance Schemes (Prescribed Description of Arrangements) Regulations 2006/1543 (“the Regulations”). These are commonly known as hallmarks.
Regulation 5 sets out the arrangements which are prescribed. It provides:
Prescribed descriptions of arrangements
The following arrangements are prescribed for the purposes of Part 7 of the FA 2004 (disclosure of tax avoidance schemes)—
in relation to income tax, corporation tax and capital gains tax, any arrangements which fall within any description specified in a provision of these Regulations listed in paragraph (2);
the provisions are—
….
regulation 8 (description 3: premium fee);
regulation 10 (description 5: standardised tax products);
…
regulation 18 (description 8: employment income provided through third parties);
regulation 19(description 9: financial products).
Regulation 8 provides:
Description 3: Premium Fee
Arrangements are prescribed if they are such that it might reasonably be expected that a promoter or a person connected with a promoter of arrangements that are the same as, or substantially similar to, the arrangements in question, would, but for the requirements of these Regulations, be able to obtain a premium fee from a person experienced in receiving services of the type being provided. But arrangements are not prescribed by this regulation if—
no person is a promoter in relation to them; and
the tax advantage which may be obtained under the arrangements is intended to be obtained by an individual or a business which is a small or medium-sized enterprise.
For the purposes of paragraph (1), and in relation to any arrangements, a “premium fee” is a fee chargeable by virtue of any element of the arrangements (including the way in which they are structured) from which the tax advantage expected to be obtained arises, and which is—
to a significant extent attributable to that tax advantage, or
to any extent contingent upon the obtaining of that tax advantage as a matter of law.
When considering these provisions, it is clear that the test requires one to consider a hypothetical experienced person rather than the actual users of the arrangements.
However, both Judge Mosedale in Hyrax at [214] and Judge Poole in Curzon (HMRC v Curzon Capital Ltd [2019] UKFTT 63 (“Curzon”) at [57) consider that the fact that in real life the promoter takes a cut from the gross fee paid for the scheme users services is good evidence that a promoter of substantially similar arrangements will be able to obtain a fee from those arrangements. A premium fee is a fee chargeable by virtue of any element of the arrangements and which is to a significant extent attributable to the expected tax advantage. It is clear from the evidence that the arrangements included a deduction of a percentage of the payments invoiced to the end user (see inter alia [13(13)ff] above).
This is also evidenced by the terms of each loan agreement where the premium which comprises one element of the consideration for the grant of the loan, is identified as being a percentage of the £250,000. In my view this is a payment to the company for the benefit of entering into the arrangements.
This percentage deduction was made because of the tax benefits which purportedly accrued to the users of the arrangements. They are, therefore, to a significant extent attributable to the expected tax advantage. This is what happened. However, I need to consider the hypothetical purchaser of the arrangements.
In Hyrax Judge Mosedale stated:
“214. It seems to me to be obvious that Hyrax was able to take a cut from the gross fee paid for the scheme user’s services; its ability to take a percentage of the gross payment is evidence that, instead of a cut, it would have been able to obtain a fee. Whether paid the same amount as a percentage of the gross earnings or as fee, the cut or fee are economically the same to a middleman, as Hyrax was; the fact it was actually able to earn an amount economically the same as a fee is good evidence that it might be reasonably expected that a promoter of substantially similar arrangements would be able to obtain a fee from the arrangements”.
I agree. The fact that an actual payment, as a percentage, was made for the provision of the arrangements is evidence that the hypothetical purchaser would have paid a fee.
I am satisfied that the arrangements fall within Regulation 8.
Having reached this conclusion, it is not strictly necessary to consider Regulations 10, 18 or 19. However, since the application deals with these, I consider them (albeit briefly) below.
Regulation 10 provides:
Description 5: standardised tax products
Subject to regulation 11, arrangements are prescribed if a promoter makes the arrangements available for implementation by more than one person and the conditions in paragraph (2) are met.
The conditions are that an informed observer (having studied the arrangements and having regard to all relevant circumstances) could reasonably be expected to conclude that—
the arrangements have standardised, or substantially standardised, documentation—
the purpose of which is to enable a person to implement the arrangements;
the form of which is determined by the promoter; and
the substance of which does not need to be tailored, to any material extent, to enable a person to implement the arrangements;
a person implementing the arrangements must enter into a specific transaction or series of specific transactions;
the transaction or series of transactions is standardised, or substantially standardised, in form; and
either the main purpose of the arrangements is to enable a person to obtain a tax advantage or the arrangements would be unlikely to be entered into but for the expectation of obtaining a tax advantage.
The bundle of documents contains six contracts of employment between users and the company. These are all essentially identical, save for the users personal details, job titles, contract dates, and remuneration. The same is true of the six loan agreements.
These are clearly standardised documents. Users of the arrangements were required to enter into them. The arrangements were standardised or substantially standardised. Their main purpose was to enable an end user to obtain a tax advantage.
The arrangements fall within Regulation 10.
Regulation 18 provides:
Description 8: Employment income provided through third parties
Arrangements are prescribed if—
Conditions 1 and 2 are met and Condition 3 is not met; or
Conditions 1, 2 and 3 are met and at least one of Conditions 4 and 5 is met.
Condition 1 is met if the arrangements involve at least one of the following—
a relevant third person taking a relevant step under section 554B;
any person taking a relevant step under section 554C or 554D; or
B taking a step under section 554Z18 or 554Z19.
Condition 2 is met if the main benefit, or one of the main benefits, of the arrangements is that an amount that would otherwise count as employment income under section 554Z2(1) is reduced or eliminated.
Condition 3 is met if, by reason of at least one of sections 554E to 554XA or regulations made under section 554Y, Chapter 2 of Part 7A does not apply.
Condition 4 is met if the arrangements involve one or more contrived or abnormal steps without which the main benefit in paragraph (3) would not be obtained.
Condition 5 is met if the arrangements involve—
a relevant step being treated as taking place; and
Chapter 2 of Part 7A applying as a consequence of sub-paragraph (a).
In this regulation—
references to sections or Parts are to those in ITEPA unless otherwise stated;
“B” has the meaning given for Part 7A by sections 554A(1)(a) and 554Z17(7) read together;
“contrived or abnormal” has the same meaning as in section 207 of the Finance Act 2013; and
“relevant third person” has the same meaning as in section 554A(7).
HMRC submit that Conditions 1 and 2 are met and Condition 3 is not met.
I agree. The company has taken a relevant step by paying users both salary and loans. The company is not a third party as the users have a contract of employment with the company. The company is “any person” because the user has provided his services to the end user which is the source of the loan payments. Those loans are calculated by reference to the amounts invoiced to the end user.
It is clear that one of the main benefits of the arrangements is to reward the user by way of a non taxable loan rather than taxable salary.
Condition 3 is not met as none of the relevant statutory exclusions apply.
I am satisfied therefore that the arrangements fall within Regulation 18.
I am also satisfied that the arrangements fall within Regulation 19. This applies if certain Conditions are met. Condition 1 is that the arrangements include at least one specified financial product. They do. They include a loan agreement which is a specified financial product.
Condition 2 is also met as the main benefit of the loan agreement is to give rise to a tax advantage. I have dealt with this above. I have come to the conclusion that the loan agreement gives rise to a tax advantage since it purportedly allows what would otherwise be taxable salary to be paid to the employee in non-taxable form.
Condition 4 applies if the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained. It is my view that these arrangements do contain contrived or abnormal steps, namely the rearrangement of the contractual position so that what would otherwise be a direct employment relationship between an end-user/agency and the user, is replaced with an employment arrangement with the company and further arrangements pursuant to which the salary to which the user would have been entitled is paid, in part, by way of a loan.
In conclusion therefore it is my view that the arrangements are notifiable arrangements for the purposes of section 306 FA 2004.
Was WSV a promoter of those notifiable arrangements?
Section 307 FA 2004 provides:
Meaning of “promoter”
For the purposes of this Part a person is a promoter—
in relation to a notifiable proposal, if, in the course of a relevant business, the person (“P”)—
is to any extent responsible for the design of the proposed arrangements,
makes a firm approach to another person (“C”) in relation to the notifiable proposal with a view to P making the notifiable proposal available for implementation by C or any other person, or
makes the notifiable proposal available for implementation by other persons, and
in relation to notifiable arrangements, if he is by virtue of paragraph (a)(ii) or (iii) a promoter in relation to a notifiable proposal which is implemented by those arrangements or if, in the course of a relevant business, he is to any extent responsible for—
the design of the arrangements, or
the organisation or management of the arrangements.
For the purposes of this Part a person is an introducer in relation to a notifiable proposal if the person makes a marketing contact with another person in relation to the notifiable proposal.
In this section “relevant business” means any trade, profession or business which—
involves the provision to other persons of services relating to taxation…
In Curzon, Judge Poole summarised the three routes to becoming a promoter in relation to “arrangements” which, as in Curzon, are the relevant routes in this application.
“83. So there are essentially three routes to becoming a promoter in relation to “arrangements” (the relevant issue in these proceedings), all contained in section 307(1)(b), which could be summarised as follows:
(1) By making, in the course of a “relevant business”, a “firm approach” to another person in relation to the notifiable proposal which is implemented by the arrangements, with a view to making the notifiable proposal available for implementation by the person so approached, or by any other person.
(2) By making, in the course of a “relevant business”, the notifiable proposal which is implemented by the arrangements available for implementation by other persons.
(3) By being responsible to any extent, in the course of a “relevant business”, for the design, organisation or management of the arrangements”.
HMRC submit that the company was carrying on a trade or business providing services relating to taxation (ie a relevant business).
I agree. It is clear from the evidence recorded above, and what I say regarding the involvement of the company in the organisation and management of the arrangements, below, that the company marketed itself as providing a service to users pursuant to which those users could participate in a scheme which would reduce their effective rate of employment tax. The company took a fee for providing that service by way of a percentage. They were in the business of providing tax services.
HMRC say there is no evidence that the company was to any extent responsible for the design of the arrangements. However, they do say that the company made the arrangements available for implementation by the users. Evidence of this stems from emails showing that the company communicated directly with end users, telling them of the services that it could supply and providing them with the relevant documentation. For example, an email to a user in May 2018 welcomes the participant to the company and explains that the documents (the employment contract and the loan agreement) would shortly be sent to the user. The email requested KYC documentation from the user and explained that they should continue to send timesheets to the agency or end client, and that the company required a copy of those completed timesheets in order to raise an invoice to the agency (on behalf of the user). It also included pension information.
The company is clearly party to the employment contracts and the loan agreements.
I am therefore satisfied that in the course of its business, the company made the arrangements available for implementation by users, and is thus a promoter within section 307(1)(a)(iii).
HMRC also submit the company was a promoter on the basis that in the course of its business it was responsible for the organisation or management of the arrangements. The evidence on which this is based is:
The company liaised with both users and end-users regarding invoicing and payments.
It received and processed timesheets.
It sent invoices to end-users for the services of its employees and received payments in respect of those invoices from those end-users.
It issued payslips to employees for their salaries and also letters of credit advice in relation to the loan payments.
It made payments of salary and loan to the users.
It responded to user’s enquiries regarding loan payments and taxation.
I have reviewed the documentary evidence on which these assertions are based and I find, as a fact, that HMRC’s assertions are correct. The company did indeed provide the services mentioned above.
To some extent, this evidence appears to be contradicted by the statements purportedly given by Mr Spencer at the creditors virtual meeting in April 2020. However, I treat that evidence with some suspicion and attribute little weight to it. Firstly, Mr Spencer was not available to be cross-examined. Secondly, I suspect it might have been self-serving given that Mr Spencer would have been aware of the conditions which the company would need to fulfil if it were to be considered a promoter. Finally, I prefer the evidence set out in the documents, as recorded above, and consider that to be a more reliable source of evidence that the company provided organisation or management.
I am satisfied therefore that the company is a promoter of the arrangements pursuant to section 307(1)(b)(ii) in that it is to some extent responsible for the organisation or management of the arrangements.
Conclusion
My conclusion is that the company was a promoter of notifiable arrangements.
Failure to comply with s308 FA2004?
A promoter of notifiable arrangements has a duty to notify HMRC of those arrangements under section 308 FA 2004.
The relevant parts of Section 308 provide:
Duties of promoter
…
A person who is a promoter in relation to notifiable arrangements must, within the prescribed period after the date on which he first becomes aware of any transaction forming part of the notifiable arrangements, provide the Board with prescribed information relating to those arrangements, unless those arrangements implement a proposal in respect of which notice has been given under subsection (1).
The terms “prescribed period” and “prescribed information” are defined in Regulations 4 and 5 of the Tax Avoidance Schemes (Information) Regulations 2012. The relevant parts of Regulation 4 provide:
Prescribed information in respect of notifiable proposals and arrangements
The information which must be provided to HMRC by a promoter under section 308(1) or (3) (duties of a promoter) in respect of a notifiable proposal or notifiable arrangements is sufficient information as might reasonably be expected to enable an officer of HMRC to comprehend the manner in which the proposal or arrangements are intended to operate, including –
the promoter’s name and address;
details of the provision of the Arrangements Regulations … by virtue of which the arrangements or proposed arrangements are notifiable;
a summary of the arrangements or proposed arrangements and the name (if any) by which they are known;
information explaining each element of the arrangements or proposed arrangements (including the way in which they are structured) from which the tax advantage expected to be obtained under those arrangements arises; and
the statutory provisions, relating to any of the prescribed taxes, on which that tax advantage is based.
…
In this regulation—
“the Arrangements Regulations” means the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006;
The relevant parts of Regulation 5 provide:
Time for providing information under section 308, 308A, 309 or 310
The period or time (as the case may be) within which—
the prescribed information under section 308, 309 or 310,
.…
In any other case of a notification under section 308(3), the prescribed period is the period of 5 days beginning on the day after that on which the promoter first becomes aware of any transaction forming part of arrangements to which that subsection applies.
HMRC have provided a copy of the signed contract by a user of the arrangements dated 24 October 2017 and their RTI records show that the earliest payments made by the company to users was on 1 November 2017. They therefore submit that the date on which the company first became aware of the transaction forming part of the arrangements was 24 October 2017 and submit that the earliest prescribed period ending five days after that date was 31 October 2017. Accordingly, the relevant day (the first day after the end of the prescribed period) was 1 November 2017.
I agree with this submission, and I find that the company’s failure to comply with its obligation to disclose started on 1 November 2017.
The liquidator submitted form AAG 1 on 15 January 2021. So, the company’s non-compliance ceased on the day before that date, namely 14 January 2021.
Reasonable excuse?
HMRC have asked me to impose a penalty on the company. They have to show that the conditions for imposing that penalty are satisfied.
However, under section 118 (2) TMA 1970, if the company has a reasonable excuse for having failed to notify HMRC of the arrangements, then (in effect) the company is deemed not to have so failed.
I therefore deal with this point before dealing with the penalty since, obviously, if I find that the company has a reasonable excuse, there is no need for me to go on to consider the penalty.
The onus is on the company to establish a reasonable excuse. I agree with HMRC that the test to be applied in relation to any excuse put forward is that set out by the Upper Tribunal in Perrin v HMRC [2018] UKUT 156.
The liquidator has made no submissions regarding reasonable excuse. The application is an adversarial process. It is not for HMRC to make the liquidator’s case. However, it is their view that the company has put forward no evidence which justifies a finding that it had a reasonable excuse.
I agree. I can see nothing in the papers justifying the failure to notify HMRC of the arrangements.
Since the company had no reasonable excuse before it went into liquidation, the liquidator could not “inherit” any reasonable excuse.
On 9 December 2020, Officer Lloyd wrote to the liquidator setting out details of the arrangements and why, in his view, those arrangements were notifiable.
So the disclosure by the liquidator on 15 January 2021 was undertaken with commendable alacrity.
However, for the period in question namely 1 November 2017 until 14 January 2021, the company had no excuse for failing to notify HMRC of the arrangements.
I therefore need to consider the penalty.
The Penalty
Any penalty is to be calculated in accordance with section 98C TMA 1970. This is far from straightforward.
So far as relevant, that section provides as follows:
98C Notification under Part 7 of Finance Act 2004
A person who fails to comply with any of the provisions of Part 7 of the Finance Act 2004 (disclosure of tax avoidance schemes) mentioned in subsection (2) below shall be liable—
to a penalty not exceeding,
in the case of a provision mentioned in paragraph (a), (b), (c), (ca) or (cc) of that subsection, £600 for each day during the initial period (but see also subsections (2A), (2B) and (2ZC) below), and
in any other case, £5,000, and
if the failure continues after a penalty is imposed under paragraph (a) above, to a further penalty or penalties not exceeding £600 for each day on which the failure continues after the day on which the penalty under paragraph (a) was imposed (but excluding any day for which a penalty under this paragraph has already been imposed).
Those provisions are—
section 308(1) and (3) (duty of promoter in relation to notifiable proposals and notifiable arrangements),
.…
sections 313A and 313B (duty of promoter to respond to inquiry),
The amount of a penalty under subsection (1)(a)(i) is to be arrived at after taking account of all relevant considerations, including the desirability of its being set at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions having regard (in particular)—
in the case of a penalty for a promoter's failure to comply with section 308(1) or (3) or section 310A 28, to the amount of any fees received, or likely to have been received, by the promoter in connection with the notifiable proposal (or arrangements implementing the notifiable proposal), or with the notifiable arrangements…
If the maximum penalty under subsection (1)(a)(i) above appears inappropriately low after taking account of those considerations, the penalty is to be of such amount not exceeding £1 million as appears appropriate having regard to those considerations…
In simple terms, as regards the application, this operates as follows. The legislation provides for a statutory maximum. In this case HMRC have calculated it at £702,600 on the basis of £600 per day for 1,171 days.
However, before considering that, I must consider section (2ZB) and decide on an amount of penalty having taken into account all relevant considerations. This includes deterrence for future promoters.
Once I have arrived at that penalty, I need to test it against the statutory maximum. Since that is less than £1 million, I can increase it, but only up to a maximum of £1 million.
HMRC submits that the considerations which I should take into account are; the company’s failure to comply and engage in satisfactory correspondence; deterring other promoters; the high level of fees earned by the company; the egregious nature of the arrangements; and the fact that the company advised users who had been approached by HMRC to disclose only their payslips.
As far as the fees are concerned, HMRC submit that for the tax years 2017/2018 to 2019/2020, the RTI data held by them show that the company’s gross receipts (as evidenced also by its output VAT) were £12.2 million. If they had retained 17% of the users fees that amounts to £2.07 million. If the company had retained 20% of those fees, it amounts to £2.44 million.
This method of calculation seems a reasonable one to me.
I agree that the circumstances warrant a penalty of this magnitude.
This exceeds the statutory maximum.
I therefore need to consider whether I should increase that up to £1 million. HMRC, for the same reasons as they give for setting the penalty at the figure set out at [84] above say that I should. This is important to deter those who might be persuaded to act as promoters of notifiable arrangements in the future and he failed to notify.
I intend to increase the penalty above the statutory maximum, and I impose it in the sum of £1 million. I do so for all the reasons given by HMRC. But also, for a reason which was not suggested by HMRC.
By failing to disclose, a promoter avoids the obligation to provide a scheme user with a scheme reference number. The provision of an SRN to a user or, more importantly a potential user of a scheme is one which is likely to put that person either on notice that something untoward is going on, or it might put them off using the scheme altogether. It is a very negative marketing indicator and is bad news for a promoter or introducer.
This also means that, given there is no regulation of the promotion of the sort of schemes by, for example, the Financial Conduct Authority, that promoters and introducers can involve unsophisticated individuals in these sorts of schemes to their detriment. And those individuals will find it very difficult to bring any form of negligence or other claim against the promoters or introducers who may (as in this case) no longer exist, or who are not worth powder and shot given the amount at stake. I take judicial notice of the number of cases that I have come across professionally where individuals who have a modest risk profile were “persuaded” to become involved in schemes (to their detriment) such as the one under consideration in this appeal, in circumstances where I strongly suspect that had an SRN been provided, the individual would not have participated.
CONCLUSION
In conclusion, therefore, I have decided as follows in respect of the four issues which I identified at the beginning of this decision:
The company was a promoter of notifiable arrangements.
It failed to comply with its notification requirements under section 308 FA 2004.
It had no reasonable excuse for that failure.
It is liable to a penalty for non-compliance of £1 million.
RIGHT TO APPLY FOR PERMISSION TO APPEAL
This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.
Release date: 09th DECEMBER 2025