• Marco Zawar MBA/LLM (Tax)

UK's new strategy to combat tax avoidance arrangements - Are Hong Kong based promotors affected?

On March 19, Her Majesty’s Revenue & Customs (“HMRC”) published a policy paper describing the future strategy on how to tackle mass-marketed tax avoidance schema.

HMRC within the policy paper spelled out that “Tax avoidance schemes are no longer mainstream products, and their creation and promotion have moved to the more disreputable and shadier end of the market. Their targeting has also changed, away from bespoke arrangements designed for the wealthy and towards mass-market schemes targeted at people on middle incomes, with more limited access to good advice”.

To address this changes, HMRC’s strategy has a specific focus on tackling promoters (financial institutions, lawyers and tax advisor and any other financial service provider) and their supply chain offering mass-marketed tax avoidance schema.

The policy describes several measures to combat the mass-marketed tax avoidance schema.

Intermediaries based in Hong Kong, should be aware, that the measures defined within the strategy paper are not limited to mass-marketed tax avoidance schema offered within the UK.

It should be noted, that HMRC's strategy takes into consideration, that where promotores are based to reside off-shore

  • to establish new data exchange agreements on financial account information;

  • to use existing exchange agreements already in place with international partners

enables HMRC to gather all relevant information needed to take offshore promoters to task.

Existing exchanges agreements includes international standards, like the

  • the Common Reporting Standard (CRS)

  • the Directive Administrative Co-operation 6 (DAC6)

  • concluded comprehensive Double Taxation Agreements containing an data exchange clause

Key take-aways

With DAC6 and their enforcement into local law in mostly all EU Member States and the UK another cornerstone was implemented to enforce tax transparency measures. The UK strategy paper stated clearly, that the UK combines all existing international tax agreements to combat mass-marketed tax avoidance arrangements.

As I raised in an earlier blog, Hong Kong based financial service provider should establish compliance procedures in place to identify avoidance schema and to bring all necessary steps into action to disclose such schema and to avoid any financial sanctions stated. "We ("HMRC" - note fo the author) want promoters to face the financial consequences of their actions with their financial risk more closely linked to the tax that their schemes are designed to avoid".

About the Author

Marco is a certified Banker, qualified MBA (finance and accounting) and qualified LLM (international business and tax law) offering 30+ years of working experiences as business consultant and tax manager achieved within Commercial Banking Institutions, Private Banking Institutes, Wealth Management Organisations and Financial Service Provider located in Europe and the APAC Region.

Marco's practical experience spans from the the introduction of investment compliance frameworks and policies supporting the monitoring of investment restriction and guidelines up-to the design and implementation of compliance frameworks, policies and technology solutions to meet local tax requirements and AML/KYC, Customer due diligence (CDD) obligations under AEoI, CRS, DAC6, FATCA and the QI Regime.

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©2019 by Marco Zawar