When can the Treasury designate a VAT avoidance scheme under Schedule 11A paragraph 3?

The Treasury may designate a scheme by order when two conditions are met: the scheme has been or might be entered into for the purpose of obtaining a tax advantage, and it is unlikely anyone would use such a scheme unless obtaining a tax advantage was a main purpose. Both conditions must be satisfied before designation.

Can the Treasury designate a VAT scheme that would not legally deliver a tax advantage?

Yes. The Treasury can designate a scheme even if it believes the scheme could not, as a matter of law, actually deliver a tax advantage to anyone. The designation power extends to legally ineffective schemes because notification and disclosure obligations under Schedule 11A should still apply, as people may still attempt to use them.

What is a reference number in relation to a designated VAT avoidance scheme?

Every designation order made by the Treasury must allocate a unique reference number to each scheme it designates. This reference number is then used in subsequent notification and reporting requirements under Schedule 11A, ensuring that each designated avoidance scheme can be specifically identified for compliance purposes.

What does 'designated scheme' mean under Schedule 11A of the Value Added Tax Act 1994?

For the purposes of the whole of Schedule 11A, a 'designated scheme' means any scheme whose description has been formally designated by the Treasury under paragraph 3. Once designated, anyone involved in a scheme matching that description must comply with the notification and disclosure requirements set out in the Schedule.

Value Added Tax Act 1994 Schedule 11A paragraph 3

Designation by order of avoidance schemes

Schedule 11A paragraph 3 sets out the Treasury's power to formally designate VAT avoidance schemes by order, including schemes that may not even succeed in law, and to assign each a reference number.

The Treasury may designate a scheme if it appears to have been, or might be, entered into for the purpose of obtaining a tax advantage, and it is unlikely anyone would use such a scheme unless obtaining a tax advantage was a main purpose.
A scheme can be designated even if the Treasury considers that, as a matter of law, no scheme of that description could actually deliver a tax advantage to anyone.
Each designated scheme must be allocated a unique reference number by the order that designates it.
A "designated scheme" is defined as any scheme of a description that has been designated under this paragraph.

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