DOTAS, the Disclosure of Tax Avoidance Schemes regime, requires certain tax avoidance schemes to be reported to HMRC, normally by the promoter, within days of being made available. Disclosed schemes are given a scheme reference number, an SRN. If you are given an SRN by a promoter, you must report it to HMRC, usually on your tax return. An SRN does not mean HMRC approves the scheme; it usually means the opposite is being examined. Failing to report an SRN carries penalties of up to £5,000 for a first failure, £7,500 for a second and up to £10,000 for each failure after that.

An SRN on a return is a flag, not a formality. Understanding what the number means, and what it commits you to, matters more than most taxpayers realise at the moment they sign up.

Who has to disclose a scheme

The disclosure duty normally sits with the promoter, who must give HMRC information about a notifiable scheme within five days of it being made available or implemented. The duty shifts to the user in limited cases: where the promoter is offshore and has not disclosed, where a lawyer cannot disclose because of legal professional privilege, or where there is no promoter because the scheme was designed in house.

What the SRN is and is not

HMRC issues an SRN when a scheme is disclosed, and can also issue one when it identifies a scheme it suspects should have been disclosed. HMRC’s guidance is explicit that issuing an SRN does not mean that HMRC approves the scheme. In practice the number exists so HMRC can see who is using the arrangement.

What a user must do

If a promoter or supplier gives you an SRN, you must report it to HMRC, usually on your tax return or on the relevant AAG form. That reporting duty is separate from whether the scheme works: you can believe the planning is effective and still be penalised for not reporting the number.

The penalties for failing to report escalate: up to £5,000 for a first failure, £7,500 for a second, and up to £10,000 for each subsequent failure. Promoters face their own, much larger, penalty regime.

Why this sits next to enquiry insurance

Users of disclosed schemes are, by construction, visible to HMRC, and enquiry activity follows visibility. Two points matter for cover. First, tax fee protection policies respond to checks that begin after cover starts, so a scheme user’s history shapes what can be insured. Second, wordings differ sharply on avoidance-related enquiries, and some exclude them outright. Anyone with an SRN on a past return should read the policy before assuming the defence costs of an enquiry are covered.

Common questions

Does an SRN mean the scheme is legal or approved?

No. HMRC states plainly that issuing an SRN does not mean it approves the scheme. Disclosure is a reporting mechanism, not a clearance.

Who reports the SRN to HMRC?

The user, usually on the tax return or the relevant AAG form, whenever a promoter or supplier has provided the number.

What if I do not report the SRN?

Escalating penalties: up to £5,000 the first time, £7,500 the second, up to £10,000 each time after that, separate from any tax found due when the scheme is challenged.

When does the duty to disclose fall on the user rather than the promoter?

Mainly where the promoter is outside the UK and has not disclosed, where legal professional privilege prevents a lawyer disclosing, or where there is no promoter because the arrangement was designed in house.

Does tax fee protection insurance cover scheme enquiries?

Often not, and never assume it. Avoidance-related enquiries are a common exclusion, and cover cannot be bought for an enquiry that is already in prospect. Read the wording.

Related guides

This page explains the DOTAS regime in general terms. It is not tax advice and does not describe the terms of any particular insurance policy.

Solar Insurance Services (Medway) Limited is registered in England and Wales, company number 05439438, and is authorised and regulated by the Financial Conduct Authority, firm reference number 459582.

Sources: HMRC guidance, Disclosure of tax avoidance schemes: overview (gov.uk).