Spring Statement 2025: What HMRC’s new tax avoidance measures mean for advisors

The Chancellor’s Spring Statement has made headlines for a number of reasons. Several key issues took centre stage, including welfare changes, economic forecasts, spending rules and defence expenditure.

However, one significant feature which may be easily overlooked was the Chancellor’s pledge to invest in HMRC’s capacity to crack down on tax avoidance – even setting a plan to increase the number of “tax fraudsters charged every year by 20%”.

Prosecutions and reality: A numbers game

Interestingly, the number of prosecutions of tax enablers (generally individuals or entities that facilitate tax avoidance or evasion schemes) has been falling year-on-year, and only a handful take place. The statistics for companies prosecuted under the Criminal Finance Act (for failing to prevent tax evasion) indicate that they are pretty much non-existent. So, an increase of 20% year-on-year might not sound like a significant number.

It is also interesting that only 5% of Suspicious Activity Reports submitted to the National Crime Agency last year related directly to tax.

It is, however, clear that HMRC is being given more resources to investigate tax evasion and avoidance across the board – from both a civil, COP9 perspective, and also from a criminal one. The number of prosecutions does not necessarily correlate to the number of investigations or settlements.

Consultations to strengthen HMRC’s powers

Running alongside the Spring Statement sit a number of consultations on proposals to close in on promoters and enablers of tax avoidance schemes and to enhance the powers of HMRC when it comes to tax advisors and tax agents. This article will combine both consultation papers.

This announcement will also support the earlier 2024 Budget in relation to tackling non-compliance in the umbrella company market, where remuneration may be disguised via tax avoidance schemes.

Tax agents and advisors are, of course, not limited to accountants but any professional operating within that space.

Reforms to DOTAS: Tougher disclosure rules ahead

A central part of these consultations will also look at strengthening DOTAS (Disclosure of Tax Avoidance Schemes). Under the current rules under DOTAS, a scheme promoters are required to disclose key elements of the scheme to HMRC, enabling early identification and intervention. Proposed reforms may include:

• A new hallmark to more clearly target disguised remuneration schemes
• A criminal offence for failure to notify arrangements under DOTAS
• Updates to the civil penalty regime under DOTAS

Criminal sanctions for  non-disclosure under DOTAS

The proposed criminal offence would fall in line with other legislation and create a new strict liability offence where an individual, without reasonable excuse, fails to notify HMRC of arrangements under DOTAS. Crucially, it would apply regardless of the person’s intent.

The suggested penalties include a maximum sentence of an unlimited fine and/or up to two years’ imprisonment.

Essentially, the government wants to make it clear that promoting tax avoidance schemes is unacceptable and that by increasing the sanctions and risks for those involved in the promotion of these schemes will help close the ‘tax gap’.

Whilst the civil penalties will continue to play a role, the government has made it clear that criminal sanctions will be considered for persistent non-compliance – not just for failing to notify under DOTAS but as part of a wider deterrence.

Expanded power to investigate and request information

Of course, HMRC already has investigatory powers in relation to individuals and businesses, commonly exercised through COP8 and COP9. It can also request information where it suspects an advisor has acted dishonestly – a high bar.

The consultation papers are looking at ways in which HMRC can gather and request information in a greater number of circumstances – i.e. lowering those thresholds. Advisors should, therefore, be alert to these likely changes.

Disciplinary disclosure to professional bodies

HMRC already has the authority to disclose matters to professional regulatory bodies where disciplinary proceedings may follow. However, the government is now looking to expand this to explore what further disclosures HMRC may make to a professional regulatory body, even when the behaviour of a tax advisor may not meet a misconduct threshold.

The rationale behind this is that it would be for the professional regulatory body to consider action, such as professional development, or actions to raise the standards of that particular advisor’s work.

Public naming and sanctions for tax advisors

As in other regulatory contexts, the government believes that it is a powerful deterrent to be able to ‘name and shame’ businesses so that consumers can have an informed choice. Again, the government is looking for a way in which the threshold of being able to publish the names of such businesses and advisors may be lowered. For example, they might look at publishing the details where Agent Codes have been suspended or where HMRC pauses any repayment claims submitted by an Agent under scrutiny.

Heavier financial penalties for dishonest advisors

The current regime includes a financial penalty for an advisor who engages in dishonest conduct that harms the tax system. The fine can range from £5,000 to £50,000. The government now believes that some advisors who repeatedly engage in high-value tax enabling/losses to the revenue would consider even the highest fine to be an acceptable loss.

The proposed reform would link penalties to the value of tax loss. Therefore, where non-compliance causes significant harm to the tax system, this could result in a penalty of millions of pounds.

Final thoughts

At Primas, we’ve seen a recent uptick in COP9 investigations, and these proposed reforms will affect not just clients but individual advisors too.

It’s a clear signal that the tax landscape is changing and compliance expectations are rising.

Looking for support on improving your tax compliance? Contact John Hartley, Head of Regulatory and Business Crime, via john.hartley@primaslaw.co.uk.