Introduction Penalties
39.Section 274 introduces Schedule 35 which contains provisions about the penalties for this Part.
40.Section 275 introduces a higher standard of reasonable excuse and reasonable care for monitored promoters and their clients for certain obligations under the Disclosure of Tax Avoidance Schemes (DOTAS) rules. A reasonable excuse for failing to comply with an obligation under the Taxes Acts can be, for example an unforeseen event or illness that prevents the person from meeting that obligation.  What constitutes reasonable excuse in any particular case depends on the specific facts of that case. Sometimes a person will obtain professional advice about whether or not they are required to meet that obligation.  They may then want to rely on the existence of that advice to argue that they have a reasonable excuse for not meeting it.  Whether or not this advice is sufficient to provide a reasonable excuse will depend on such factors as the competency of the adviser and the relevance of the advice to the facts.  There is a requirement to take reasonable care when submitting returns and other information to HMRC. What is reasonable care for a person will vary according to the circumstances of the case; again someone may argue that they have taken reasonable care because they have obtained professional advice.  There is detailed guidance on reasonable excuse and reasonable care in HMRC’s Compliance Handbook.
41.The higher standard of reasonable excuse and reasonable care for clients in these sections ensures that the client cannot rely on legal advice provided to them by the monitored promoter in order to claim that they had a reasonable excuse or took reasonable care.  This does not meant that the person cannot have a reasonable excuse at all, there may be other circumstances or they may have obtained independent legal advice that will allow HMRC or the Tribunal to consider if they have a reasonable excuse.
42.The higher standard of reasonable excuse and reasonable care for promoters is different.  The higher standard is based on the relevance of the legal advice and it ensures that the monitored promoter cannot rely on legal advice for the defences of reasonable excuse and reasonable care if the advice was not based on a full and accurate description of the facts or if the conclusions in the advice were unreasonable.
43.Section 275 introduces the higher standard for reasonable excuse for a client by inserting new subsection (2EA) into section 98C Taxes Management Act 1970 (the DOTAS penalty provisions). It applies where the client of an offshore promoter has failed to comply with their obligation to provide information about notifiable arrangements either under section 309 or 310 Finance Act 2004. If the client wishes to argue that they have a reasonable excuse under section 118 Taxes Management Act 1970 then they cannot rely on legal advice given to them or obtained by the monitored promoter.
44.New subsection (2EB) introduces the higher standard of reasonable excuse for a monitored promoter’s DOTAS obligations. For example this applies to the monitored promoter’s duty to notify proposals and arrangements under DOTAS, to provide clients with scheme reference numbers and to provide details of clients.  Section 276 introduces the higher standard of reasonable care for clients’ tax returns and accounts (as listed in  paragraph 1 of Schedule 24 Finance Act 2007).  The higher standard is as described in paragraph 41 above and ensures that the client cannot rely on legal advice provided to them by the monitored promoter in order to claim that they had a reasonable excuse or took reasonable care.
45.Where tax is lost due to the client’s failure to notify HMRC of the monitored promoter’s reference number section 277 provides for an extended time limit of 20 years for raising assessments in respect of income tax, capital gains tax, corporation tax, inheritance tax, petroleum revenue tax, stamp duty land tax, and the annual tax on enveloped dwellings.