In HMRC v Root2 Tax Ltd [2017] TC 06115, the First Tier Tribunal (FTT) found that an employee reward scheme did meet the criteria for disclosure under DOTAS and should have been disclosed by the promoters.

A tax arrangement must be disclosed to HMRC under DOTAS when:

  • It will, or might be expected to, enable any person to obtain a tax advantage, and
  • That tax advantage is, or might be expected to be, the main benefit or one of the main benefits of the arrangement, and
  • It is a tax arrangement that falls within any description ('hallmarks') prescribed in the relevant regulations.
  • Disclosure is generally required to be made by the scheme 'promoter'

The ‘Alchemy’ scheme involved an employee entering into almost simultaneous spread bets and hedging transactions.

  • Root2 claimed the scheme was not disclosable under the DOTAS regulations.
  • They raised various arguments to support this view.
  • The main claim was that the tax advantage was not, or might not be expected to be, the main benefit or one of the main benefits of the arrangement, because the spread bet could go either way; the employee could achieve a profit or suffer a loss, with taxes being paid when there was a profit.

The FTT disagreed and found that the arrangements were notifiable:

  • The scheme amounted to ‘arrangements’;
  • The scheme enabled, or might be expected to enable, a person to obtain a tax advantage;
  • The main benefit, or one of the main benefits, of the scheme (if it works) is the obtaining of that advantage;
  • It was a standard product;
  • Root2 were the ‘promoters’ of the scheme in the statutory sense.

This is the first case to have been heard in respect of a DOTAS notification. The effect of the decision is twofold; it enables HMRC not only to penalise Root2 for failing to notify the scheme under the DOTAS regulations, but also to issue Accelerated Payment Notices (APNs) on all taxpayers who took part in the scheme. Under the DOTAS rules there is no right of appeal against the decision which leaves judicial review as the only possible remaining option.


HMRC v Root2 Tax Ltd [2017] TC 06115


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