September CPD Newsbrief — Personal tax
HMRC hits the gas
The passing of the Finance Act 2014 has given HMRC the green light for accelerated payments.
HMRC jumped the gun somewhat. A couple of days before the Finance Bill 2014 received Royal Assent it published a list of nearly 1,200 tax avoidance schemes whose users would be the first subjected to the Finance Act’s accelerated payments rules. Those rules effectively allow HMRC to demand payment of tax on any scheme that is in dispute within 90 days of issuing a Notice to Pay.
The list consisted solely of scheme reference numbers (SRNs) given under the Disclosure of Tax Avoidance Schemes (DOTAS) regime. The exotic names (Eclipse, Icebreaker, etc) that had garnered so many unflattering press headlines were absent, because HMRC does not know them all.
Accompanying the list was a statement that HMRC would be working through the SRNs over about the next 20 months, so it may not be until March 2016 that some people first hear from HMRC. The number of schemes on the list, and the fact that very few schemes have been registered in the past few years, suggests that HMRC is going right the way back to schemes registered around the start of DOTAS, in August 2004.
HMRC reckons that there are 33,000 individuals and 10,000 companies that have used the schemes on its list and that the total revenue at stake is more than £7bn. How much of that will actually be forthcoming is unclear. Reports suggest that the gearing common in many schemes can lead to HMRC seeking tax payments that are considerably more than the original ‘investment’.
For now, the accelerated payments procedure does not apply to NIC avoidance schemes (an important point for EBTs and EFRBS), but the National Insurance Contributions Bill 2014 (currently before Parliament) will soon remove this exemption.
The prolonged timescale for issuing Notices to Pay is a reminder that in the world of aggressive avoidance, nothing happens quickly.
Govt to toughen up on offshore tax evasion
The government has set out plans to make failure to declare offshore tax arrangements a criminal offence.
In a consultation published on 20 August, the government proposes to make it a “strict liability offence” to conceal funds offshore for illegitimate tax purposes. Under the proposals, a strict liability offence is a criminal offence where it is not necessary for the court to establish the state of mind of the defendant before convicting. The government is also planning to toughen the existing civil penalties for tax evasion.
The UK has agreements in place with the Isle of Man and other UK overseas territories, which means offshore accounts information is shared with HMRC. It has information sharing deals that mean 33 different jurisdictions share data in a “common reporting standard”.
HMRC will “prioritise for criminal investigation” anyone who moves money to a jurisdiction that is not part of the common reporting standard project.
In some jurisdictions, HMRC has invited those with offshore assets to voluntarily declare their arrangements of in a certain period of time. The Isle of Man disclosure facility is open from 6 April 2013 until 30 September 2016.
Treasury financial secretary David Gauke says: “Over 56,000 people have already told HMRC about what they owe offshore and HMRC has offered opportunities to clear things up as quickly and easily as possible. Those that don’t come forward must face tough consequences, including a criminal conviction.”
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