HMRC guidance on indirect taxes DOTAS obligations applicable from 1 January 2018

Wed 10 Jan 2018

HMRC has issued Notice 799 providing its guidance on how the Disclosure of Tax Avoidance Schemes: VAT and Other Indirect Taxes rules  (’DASVOIT’) rules apply from 1 January 2018 (i.e. DOTAS for VAT and other indirect taxes).

A disclosure may be in point where arrangements give rise to a ‘tax advantage’ (as defined) which is the main benefit, or one of the main benefits, of the arrangements. The new indirect tax disclosure rules are based on the direct tax DOTAS rules of hallmarks, rather than prescribed schemes that previously applied for VAT, are broadened to cover more indirect taxes than VAT, and apply to scheme promoters for the first time, as well as scheme users.  The hallmarks include the general hallmarks of confidentiality, both from competitors and HMRC, premium fee and standardised products as with DOTAS for direct taxes, followed by a number of specific hallmarks particular to VAT.

The closer alignment with the DOTAS rules for direct tax applies to the administration aspects as well, such as an obligation on a promoter to disclosure , and the inclusion in quarterly reporting of clients to HMRC, and definitions, such as ‘promoter’ and ‘introducer’.

The guidance includes some basic flow charts: one for VAT arrangements (section 5.3) and for other indirect taxes (section 6.3). The hallmarks are numbered in the guidance in a way that does not correspond with the numbering used in the regulation (SI 2017/1216).

Importantly, grandfathering applies to exclude existing arrangements that have already been implemented or are already well known, including arrangements which are substantially the same. So arrangements made available by a promoter before 1 January 2018, or where the promoter has become aware of transactions forming part of those arrangements before 1 January 2018, are excluded.

The guidance has links to the various disclosure forms for indirect tax (DASVOIT1 – DASVOIT5). The deadlines for promoters making disclosures to HMRC are more generous than those for direct taxes, allowing 31 days from:

• making a firm approach;
• making proposals available for implementation;
• becoming aware of the client entering into a transaction forming part of the arrangements.

Penalties for non-disclosure can range from amounts not exceeding £600 per day up to and exceeding £1m.

Businesses and advisers will need to carefully consider how these new disclosure rules could impact them. For a further discussion of the implications, please get in touch with a member of the Mazars indirect tax or tax investigation teams.