Penalties for enablers of defeated tax avoidance arrangements apply for arrangements entered into on or after 16 November 2017. Tax avoidance enabler penalties represent the second prong of a twin-pronged weaponization of the GAAR. The other prong is the 60% GAAR penalty for users of tax avoidance arrangements that are defeated under the GAAR. Enabler penalties impose a penalty charge on advisers when tax avoidance arrangements are defeated under the GAAR.
The enabler penalty is payable by each person who enabled the defeated tax avoidance arrangements. “Enabler” includes a designer, manager, marketer, enabling participant and a financial enabler of the arrangements.
The penalty is equal to the total amount of consideration received or receivable by an enabler for the defeated tax avoidance arrangements. Consideration paid to anyone else can also be included.