Financial planning

DOTAS: Tighter regulations on tax

Shona Lowe

You may have heard rumblings recently about new legislation that increases the requirements to report your tax planning. When this sort of thing is announced, it can sometimes cause a few worries as people start to wonder if their own financial plans are still above board. I wanted to take the time to clarify that the new rules are unlikely to affect most of our clients, or indeed the vast majority of people in the UK. However if it does affect you, as an 1825 client we can handle the reporting requirements for you, so you don’t need to worry about failing to comply.


What I’m talking about here is “DOTAS” (Disclosure of Tax Avoidance Schemes) and something known as the “Requirement to correct”. They’re both very technical bits of tax legislation and I want to stress again that they’re not anything for you to be worried about, unless:

  • You are involved in complex tax planning which involves contrived or abnormal steps; or
  • You have foreign assets, income or gains that you’re required to pay UK tax on and haven’t done so.

That being said, if you want to understand a bit more about the new rules and who they do impact, read on for a high level overview.

DOTAS: the disclosure of tax avoidance schemes

The DOTAS rules were implemented to enable HMRC to keep up to date with the different tax avoidance schemes in circulation. By requiring disclosure of these schemes, DOTAS acts as an early warning system for HMRC.

For individual clients involved in these schemes, it means they could see their details passed to HMRC and be flagged as a ‘high risk tax payer’. Whilst having to report doesn’t automatically mean that an arrangement is ineffective or that it will be challenged by HMRC, the reporting process itself can still cause concern.

Tax planning – not tax evasion or reportable avoidance

Estate planning (and tax planning in general) isn’t the same as tax evasion or reportable tax avoidance. And none of the arrangements, planning or tax wrappers that we would typically use at 1825 are impacted by the DOTAS rules.

The terminology here can be very confusing. Tax evasion is the illegal practice of not paying taxes. Tax avoidance generally involves bending the rules of the tax system to gain a tax advantage that Parliament never intended. In some cases, it can involve contrived, artificial steps that serve little or no purpose other than to produce this advantage. While these schemes technically don’t break the letter of the law, they don’t operate within the spirit of it and may be reportable.

The “Requirement to Correct”

From October 2018 significantly higher penalties (up to 100% of the tax involved) will apply to UK taxpayers who have failed to pay all the UK tax due on their foreign income and gains. So if you haven’t always declared all your foreign revenue to HMRC in the past you’ve got until 30 September 2018 to bring your tax affairs up to date, before the failure to correct (FTC) penalties kick in. If you do that, you’ll still have to pay the tax, any interest and the normal penalties, but not the FTC ones.

If you do have foreign income or gains it’s worth getting professional advice to help you understand what needs to be reported and how. Even if it was unintentional, people who genuinely believed they didn’t have to declare anything to HMRC will still come within the scope of these rules and so will still face the consequences of not reporting.

Who’s likely to be affected?

If you’re a UK resident, ‘foreign income or gains’ that you’re required to declare could be things like:

• income you get from renting out a property abroad or a gain you made from selling a holiday home; or
• interest you receive from an offshore bank account.

Playing it safe

As I said at the start, the majority of people are unlikely to be affected by these two pieces of legislation. But if you do have foreign income/gains or have ventured off the beaten track in terms of tax planning, it’s always worth seeking advice to stay on the right side of the rules.

At 1825 we have a team of tax and estate planning specialists who can help you navigate the new reporting requirements. If you’d like us to take a look at your financial plan, please don’t hesitate to get in touch. You can call us directly on 0113 228 0900* or use our form to send us a message.

*Call charges will vary. Our offices are open Monday-Friday, 9am-5pm.


Laws and tax rules may change in the future and the information here is based on our understanding in June 2018. Personal circumstances also have an impact on tax treatment. The information in this blog should not be regarded as financial advice.