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T2: Collection from third parties

Tax avoidance and evasion (liability of persons involved/benefitting)

 

Power to issue notice

"(12)     An individual who is given a notice under sub-paragraph (1) is jointly and severally liable with the company (and with any other individual who is given such a notice) for the relevant tax liability.

This is subject to paragraph 9 (interaction with penalties)." (FA 2020, Sch 13, para 2(12))

"(1)     An authorised HMRC officer may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to E are met." (FA 2020, Sch 13, para 2(1))

 

Company

"(3)     In this Schedule “company” has the same meaning as in the Corporation Tax Acts (see section 1121 of CTA 2010), except that it also includes a limited liability partnership.

(4)     Paragraph 18 makes provision about the application of this Schedule in relation to limited liability partnerships." (FA 2020, Sch 13, para 1(3) - (4))

Condition A: tax avoidance or evasion by company

"(2)     Condition A is that a company has—

(a)     entered into tax-avoidance arrangements, or

(b)     engaged in tax-evasive conduct." (FA 2020, Sch 13, para 2(2))

 

Company B: insolvency procedure (or serious possibility of)

"(3)     Condition B is that—

(a)     the company is subject to an insolvency procedure, or

(b)     there is a serious possibility of the company becoming subject to an insolvency procedure." (FA 2020, Sch 13, para 2(3))

 

Condition C: individual responsible for conduct, received benefit or director who facilitated/assisted

"(4)     Condition C is that—

(a)     the individual—

(i)     was responsible (whether alone or with others) for the company entering into the tax-avoidance arrangements or engaging in the tax-evasive conduct, or

(ii)     received a benefit which, to the individual's knowledge, arose (wholly or partly) from those arrangements or that conduct,

at a time when the individual was a director or shadow director of the company or a participator in it, or

(b)     the individual took part in, assisted with or facilitated the tax-avoidance arrangements or the tax-evasive conduct at a time when the individual—

(i)     was a director or shadow director of the company, or

(ii)     was concerned, whether directly or indirectly, or was taking part, in the management of the company." (FA 2020, Sch 13, para 2(4))

 

Treated as knowing anything they could reasonably be expected to know

"(5)     For the purposes of sub-paragraph (4)(a)(ii)—

(a)     an individual is treated as knowing anything that the individual could reasonably be expected to know;..." (FA 2020, Sch 13, para 2(5))

Treated as receiving benefits received by connected persons

"(5)     For the purposes of sub-paragraph (4)(a)(ii)—

...

(b)     an individual is treated as receiving anything that is received by a person with whom the individual is connected (within the meaning given by section 993 of ITA 2007)." (FA 2020, Sch 13, para 2(5))

Condition D: tax liability referable to the tax avoidance/evasion

"(6)     Condition D is that there is, or is likely to be, a tax liability referable to the tax-avoidance arrangements or to the tax-evasive conduct (“the relevant tax liability”)." (FA 2020, Sch 13, para 2(3))

 

Condition E: serious possibility that the tax will not be paid

"(7)     Condition E is that there is a serious possibility that some or all of the relevant tax liability will not be paid." (FA 2020, Sch 13, para 2(7))

 

Content of notice

"(8)     A notice under sub-paragraph (1) must—

(a)     specify the company to which the notice relates;

(b)     set out the reasons for which it appears to the officer that conditions A to E are met;

(c)     state the effect of the notice;

(d)     offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(e)     explain the effect of paragraph 13 (right of appeal).

(9)     It must also—

(a)     specify the amount of the relevant tax liability, if the existence and amount of that liability have been established;

(b)     if not, indicate that the amount will be specified in a further notice." (FA 2020, Sch 13, para 2(8))

 

Further notice quantifying tax liability

"(10)     Once the existence and amount of the relevant tax liability have been established in a case to which sub-paragraph (9)(b) applies, an authorised HMRC officer must give a further notice specifying that amount.

 

(11)     A notice under sub-paragraph (10) must—

(a)     be given to the individual to whom the notice under sub-paragraph (1) was given;

(b)     offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(c)     explain the effect of paragraph 13 (right of appeal)." (FA 2020, Sch 13, para 2(10) - (11))

 

Amount of liability

"(13)     The amount of the individual's liability under sub-paragraph (12) is taken to be the amount specified under sub-paragraph (9)(a) or (10).

For provision under which the amount so specified may be varied, see—

(a)     paragraph 10 (modification etc),

(b)     paragraphs 11 and 12 (review), and

(c)     paragraphs 13 and 14 (appeal)." (FA 2020, Sch 13, para 2(13))

Tax avoidance and evasion (liability of persons involved/benefitting)

Repeated company insolvency and non-payment of tax (liability of directors and participators)

Liability for new company tax liability

"(7)     An individual who is given a notice under sub-paragraph (1) is jointly and severally liable with the new company (and with any other individual who is given such a notice)—

(a)     for any tax liability that the new company has on the day on which the notice is given, and

(b)     for any tax liability of the new company that arises—

(i)     during the period of five years beginning with that day, and

(ii)     while the notice continues to have effect." (FA 2020, Sch 13, para 3(7))

 

Liability for old company liability

 

(8)     If an old company referred to in sub-paragraph (4)(a) or (b) has a tax liability on the day on which an individual is given a notice under sub-paragraph (1), the individual is also jointly and severally liable with that company (and with any other individual who is given such a notice) for that liability.

(9)     Sub-paragraphs (7) and (8) are subject to paragraph 9 (interaction with penalties)." (FA 2020, Sch 13, para 3(8) - (9))

Power to issue notice

"(1)     An authorised HMRC officer may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to D are met." (FA 2020, Sch 13, para 3(1))

 

Condition A: two previous company failures in the last 5 years

"(3)     Condition A is that there are at least two companies (“the old companies”) in the case of each of which—

(a)     the individual had a relevant connection with the company at any time during the period of five years ending with the day on which the notice is given (“the five-year period”),

(b)     the company became subject to an insolvency procedure during the five-year period, and

(c)     at the time when the company became subject to that procedure—

(i)     the company had a tax liability, or

(ii)     the company had failed to submit a relevant return or other document, or to make a relevant declaration or application, that it was required to submit or make, or

(iii)     the company had submitted a relevant return or other document, or had made a relevant declaration or application, but an act or omission on the part of the company had prevented HMRC from dealing with it.

In sub-paragraphs (ii) and (iii) “relevant” means relevant to the question whether the company had a tax liability or how much its tax liability was." (FA 2020, Sch 13, para 3(3))

 

Relevant connection with old company

"(10)     For the purposes of this paragraph—

(a)     an individual has a “relevant connection” with one of the old companies if the individual—

(i)     is a director or shadow director of the company, or

(ii)     is a participator in the company;..." (FA 2020, Sch 13, para 3(10))

Condition B: new company carrying on similar trade/activity to old companies

"(4)     Condition B is that another company (“the new company”) is or has been carrying on a trade or activity that is the same as, or is similar to, a trade or activity previously carried on by—

(a)     each of the old companies (if there are two of them), or

(b)     any two of the old companies (if there are more than two)." (FA 2020, Sch 13, para 3(4))

Condition C: individual has relevant connection with new company

"(5)     Condition C is that the individual has had a relevant connection with the new company at any time during the five-year period." (FA 2020, Sch 13, para 3(5))

 

Relevant connection with new company

"(10)     For the purposes of this paragraph—

...

(b)     an individual has a “relevant connection” with the new company if the individual—

(i)     is a director or shadow director of the company,

(ii)     is a participator in the company, or

(iii)     is concerned, whether directly or indirectly, or takes part, in the management of the company." (FA 2020, Sch 13, para 3(10))

Condition D: at least 1 old company has a tax liability over £10k and HMRC main creditor

"(6)     Condition D is that at the time when the notice is given—

(a)     at least one of the old companies referred to in sub-paragraph (4)(a) or (b) has a tax liability, and

(b)     the total amount of the tax liabilities of those companies—

(i)     is more than £10,000, and

(ii)     is more than 50% of the total amount of those companies' liabilities to their unsecured creditors." (FA 2020, Sch 13, para 3(6))

Time limit: 2 years from HMRC having sufficient facts to conclude conditions met

"(2)     A notice under sub-paragraph (1) may not be issued after the end of the period of two years beginning with the day on which HMRC first became aware of facts sufficient for them reasonably to conclude that conditions A to D are met." (FA 2020, Sch 13, para 3(2))

Form of notice

 

"(11)     A notice under sub-paragraph (1) must—

(a)     set out the reasons for which it appears to the officer giving the notice that conditions A to D are met;

(b)     state the effect of the notice;

(c)     specify any amounts for which the individual is liable under sub-paragraph (7)(a) or (8);

(d)     offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(e)     explain the effect of paragraph 13 (right of appeal)." (FA 2020, Sch 13, para 3(11))

Amount of liability

"(12)     The amount of the individual's liability under sub-paragraph (7)(a) or (8) is taken to be the amount specified under sub-paragraph (11)(c).

For provision under which the amount so specified may be varied, see—

(a)     paragraph 10 (modification etc),

(b)     paragraphs 11 and 12 (review), and

(c)     paragraphs 13 and 14 (appeal)." (FA 2020, Sch 13, para 3(12))

Repeated company insolvency and non-payment of tax (liability of directors and participators)

Facilitation of avoidance or evasion penalties on companies (liability of directors and participators)

 

Power to issue notice

"(11)     An individual who is given a notice under sub-paragraph (1) is jointly and severally liable with the company (and with any other individual who is given such a notice) for the amount of the penalty." (FA 2020, Sch 13, para 5(1))

"(1)     An authorised HMRC officer may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to D are met." (FA 2020, Sch 13, para 5(11))

 

Condition A: penalty relating to avoidance/evasion imposed on company

"(2)     Condition A is that—

(a)     a penalty under any of the specified provisions (see sub-paragraph (6)) has been imposed on a company by HMRC, or

(b)     proceedings have been commenced before the First-tier Tribunal for a penalty under any of those provisions to be imposed on a company." (FA 2020, Sch 13, para 5(2))

Specified provisions

"(6)     The specified provisions are—

(a)     section 98C(1) of the TMA 1970 (penalties for breach of certain obligations relating to disclosure of tax avoidance schemes by promoters etc of schemes);

(b)     paragraphs 2 and 3 of Schedule 35 to FA 2014 (promoters of tax avoidance schemes: penalties);

(c)     paragraph 1 of Schedule 20 to FA 2016 (penalties for enablers of offshore tax evasion or non-compliance);

(d)     Part 1 of Schedule 16 to F(No.2)A 2017 (penalties for enablers of defeated tax avoidance);

(e)     Part 2 of Schedule 17 to that Act (penalties for breach of certain obligations relating to disclosure of tax avoidance schemes by promoters etc of schemes).

(f)     Schedule 13 to FA 2022 (penalties for facilitating avoidance schemes involving non-resident promoters)." (FA 2020, Sch 13, para 5(6))

Condition B: company insolvent (or serious possibility)

"(3)     Condition B is that—

(a)     the company is subject to an insolvency procedure, or

(b)     there is a serious possibility of the company becoming subject to an insolvency procedure." (FA 2020, Sch 13, para 5(3))

 

Condition C: individual was director, shadow director or participator at relevant time

"(4)     Condition C is that the individual was a director or shadow director of the company, or a participator in it, at the time of any act or omission in respect of which—

(a)     the penalty was imposed, or

(b)     the proceedings for the penalty were commenced." (FA 2020, Sch 13, para 5(4))

 

Condition D: serious possibility of penalty not being paid

"(5)     Condition D is that there is a serious possibility that some or all of the penalty will not be paid." (FA 2020, Sch 13, para 5(5))

Form of notice

"(7)     A notice under sub-paragraph (1) must—

(a)     specify the company to which the notice relates;

(b)     set out the reasons for which it appears to the officer that conditions A to D are met;

(c)     state the effect of the notice;

(d)     offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(e)     explain the effect of paragraph 13 (right of appeal).

(8)     It must also—

(a)     specify the amount of the penalty, if sub-paragraph (2)(a) applies;

(b)     if sub-paragraph (2)(b) applies, indicate that the amount will be specified in a further notice." (FA 2020, Sch 13, para 5(7))

Further notice specifying quantum

"(9)     Once the existence and amount of the penalty have been established in a case where sub-paragraph (2)(b) applies, an authorised HMRC officer must give a further notice specifying that amount.

(10)     A notice under sub-paragraph (9) must—

(a)     be given to the individual to whom the notice under sub-paragraph (1) was given;

(b)     offer the individual a review of the decision to give the notice, and explain the effect of paragraph 11 (right of review);

(c)     explain the effect of paragraph 13 (right of appeal)." (FA 2020, Sch 13, para 5(9) - (10))

 

Amount of liability

"(12)     The amount of the individual's liability under sub-paragraph (11) is taken to be the amount specified under sub-paragraph (8)(a) or (9).

For provision under which the amount so specified may be varied, see—

(a)     paragraph 10 (modification etc),

(b)     paragraphs 11 and 12 (review), and

(c)     paragraphs 13 and 14 (appeal)." (FA 2020, Sch 13, para 5(12))

Facilitation of avoidance or evasion penalties on companies (liability of directors and participators)

Collection of unpaid corporation tax from seller following change of ownership of company

 

CTA 2010, s.710

Collection of unpaid corporation tax from seller following change of ownership of company

Collection from proper officer of company that is not a body corporate or is offshore

"(2)     Corporation tax or other tax chargeable under the Corporation Tax Acts on a company which is not a body corporate, or which is a body corporate not incorporated under any enactment forming part of the law of the United Kingdom, or by Charter, may, at any time after the tax becomes due, and without prejudice to any other method of recovery, be recovered from the proper officer of the company, and that officer may retain out of any money coming into his hands on behalf of the company sufficient sums to pay that tax, and, so far as he is not so reimbursed, shall be entitled to be indemnified by the company in respect of the liability so imposed on him." (TMA 1970, s.108(2))

"(1)     In this Part “company”, except as otherwise expressly provided, means any body corporate or unincorporated association, but does not include a partnership.

[...]

(4)     Tax due from a company that—

(a)     is not a body corporate, or

(b)     is incorporated under the law of a country or territory outside the United Kingdom,

may, without prejudice to any other method of recovery, be recovered from the proper officer of the company.

(5)     The proper officer may retain out of any money coming into his hands on behalf of the company sufficient sums to pay that tax and, so far as he is not so reimbursed, he is entitled to be indemnified by the company in respect of the liability imposed on him." (FA 2003, s.100)

Proper officer (corporation tax)

"(3)     For the purposes of this section—

(a)     the proper officer of a company which is a body corporate shall be the secretary or person acting as secretary of the company, except that if a liquidator or administrator has been appointed for the company the liquidator or, as the case may be, administrator shall be the proper officer,

(b)     the proper officer of a company which is not a body corporate or for which there is no proper officer within paragraph (a) above, shall be the treasurer or the person acting as treasurer, of the company.

 

(4)     For the purposes of subsection (3)(a), where two or more persons are appointed to act jointly or concurrently as the administrator of a company, the proper officer is—

(a)     such one of them as is specified in a notice given to the Board by those persons for the purposes of this section, or

(b)     where the Board is not so notified, such one or more of those persons as the Board may designate as the proper officer for those purposes." (TMA 1970, s.108(3) - (4))

Proper officer (SDLT)

"(6)     For the purposes of this Part—

(a)     the proper officer of a body corporate is the secretary, or person acting as secretary, of the company, and

(b)     the proper officer of an unincorporated association, or of a body corporate that does not have a proper officer within paragraph (a), is the treasurer, or person acting as treasurer, of the company.

This subsection does not apply if a liquidator or administrator has been appointed for the company.

(7)     If a liquidator or administrator has been appointed for the company, then, for the purposes of this Part—

(a)     the liquidator or, as the case may be, the administrator is the proper officer, and

(b)     if two or more persons are appointed to act jointly or concurrently as the administrator of the company, the proper officer is—

(i)     such one of them as is specified in a notice given to the Inland Revenue by those persons for the purposes of this section, or

(ii)     where the Inland Revenue is not so notified, such one or more of those persons as the Inland Revenue may designate as the proper officer for those purposes." (FA 2003, s.100)

Collection from proper officer of company that is not a body corporate or is offshore
Collection from controlling directors and group companies if company ceases to be UK resident and does not pay tax

Collection from controlling directors and group companies if company ceases to be UK resident and does not pay tax

 

"(1)     This section applies if—

(a)     a company (“the migrating company”) ceases to be resident in the United Kingdom at any time, and

(b)     any tax which is payable by the company in respect of periods beginning before that time is not paid within 6 months from the time when it becomes payable.

 

(1A)     The reference in subsection (1)(b) to the time when tax becomes payable is a reference to—

(a)     in a case where a CT exit charge payment plan has been entered into in accordance with Schedule 3ZB in respect of the tax, the time when the tax becomes payable under the plan, and

(b)     in any other case, the time when the tax becomes payable in accordance with section 59D or 59E.

 

(2)     The Commissioners for Her Majesty's Revenue and Customs may, at any time before the end of the period of 3 years beginning with the relevant time, serve on any person within subsection (3) a notice—

(a)     stating particulars of the tax payable, the amount remaining unpaid and the date when it became payable, and

(b)     requiring that person to pay that amount within 30 days of the service of the notice." (TMA 1970, s.109E(1) - (2A))

 

Extended definition of tax

"(1)     In sections 109B to 109E, any reference to the tax payable by a company includes a reference to—

(a)     any amount which the company is liable to pay under section 77C (territorial extension of charge to tax),

(b)     any amount of tax which the company is liable to pay under regulations made under section 684 of ITEPA 2003 (PAYE),

(c)     any amount which the company is liable to pay under sections 61 and 62(1)(a) of the Finance Act 2004 (sub-contractors in the construction industry),

(d)     any income tax which the company is liable to pay in respect of payments within section 946 of ITA 2007 (collection of tax: deposit-takers, building societies and certain companies), and

(e)     any amount representing income tax which the company is liable to pay under section 966 of ITA 2007 (entertainers and sportsmen).

 

(2)     In sections 109B to 109E read in accordance with subsection (1), any reference to the tax payable by a company in respect of periods beginning before any particular time includes a reference to any interest—

(a)     on the tax so payable, or

(b)     on tax paid by the company in respect of such periods,

which the company is liable to pay in respect of periods beginning before or after that time." (TMA 1970, s.109F(1) - (2))

Persons liable

"(3)     The persons within this subsection are—

(a)     any company which is, or within the pre-migration year was, a member of the same group as the migrating company,

(b)     any person who is, or within the pre-migration year was, a controlling director of the migrating company, and

(c)     any person who is, or within the pre-migration year was, a controlling director of a company which has, or within the pre-migration year had, control over the migrating company." (TMA 1970, s.109E(3))

"(7)     In this section—

“controlling director”, in relation to a company, means a director of the company who has control of the company,

“group” has the meaning which would be given by section 170 of the 1992 Act if in that section for references to 75 per cent subsidiaries there were substituted references to 51 per cent subsidiaries, and

“pre-migration year” means the period of 12 months ending with the time when the migrating company ceases to be resident in the United Kingdom." (TMA 1970, s.109E(7))

Extended definition of director

"(3)     In sections 109B to 109E “director”, in relation to a company, is to be read in accordance with the following provisions—

(a)     section 67(1) and (2) of ITEPA 2003, and

(b)     section 452 of CTA 2010." (TMA 1970, s.109F(3))

Meaning of control

"(4)     In sections 109B to 109E, any reference to a person having control of a company is to be read in accordance with sections 450 and 451 of CTA 2010." (TMA 1970, s.109F(4))

Relevant time

"(2A)     In subsection (2) the “relevant time” means—

(a)     in a case where a CT exit charge payment plan has been entered into in accordance with Schedule 3ZB in respect of the tax, the later of—

(i)     the first day after the period of 12 months beginning immediately after the migration accounting period (as defined in Part 1 or 2 of Schedule 3ZB, as the case may be), and

(ii)     the date on which the tax is payable under the plan, and

(b)     in any other case, the time when the amount of the tax is finally determined." (TMA 1970, s.109E(2A))

Recoverable as tax

"(4)     Any amount which a person is required to pay by a notice under this section may be recovered from the person as if it were tax due and duly demanded from the person." (TMA 1970, s.109E(4))

 

Not deductible

"(6)     A payment in pursuance of a notice under this section is not allowed as a deduction in calculating any income, profits or losses for any tax purposes." (TMA 1970, s.109E(6))

Right to reimbursement from the company

"(5)     If a person (“P”) pays any amount which a notice under this section requires P to pay, P may recover the amount from the migrating company." (TMA 1970, s.109E(5))

Collection from Societas Europaea (SE) where UK resident company merged into SE

 

"(1)     Sub-paragraph (2) applies if at any time a company ceases to be resident in the United Kingdom in the course of the formation of an SE by merger, whether or not the company continues to exist after the formation of the SE.

(2)     The other Parts of this Schedule apply after that time, but in relation to liabilities accruing and matters arising before that time—

(a)     as if the company were still resident in the United Kingdom, and

(b)     if the company has ceased to exist, as if the SE were the company." (FA 1998, Sch 18, para 87A)

"In this Part “SE” means a European public limited-liability company (or Societas Europaea) within the meaning of Council Regulation (EC) No 2157/2001 on the Statute for a European company." (FA 1998, Sch 18, para 87C)

Collection from SE where UK resident company merged into SE
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