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Government unveils tax avoidance crackdown

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Government has brought forward proposals to restrict tax avoidance in a move expected to save £5bn over the course of Parliament.

The Treasury says the measures are a “necessary step” to protect the Exchequer and maintain “fairness” for taxpayers, while providing certainty for businesses.

Two measures will be brought in with immediate effect. Firstly, groups of companies will be prevented from using intra-group loans or derivatives to reduce tax bills. Secondly, rules will be brought in to address schemes where a company does not fully recognise certain amounts in its accounts involving loans and derivatives.

Further measures due to be set out “shortly” will seek to reduce tax avoidance through addressing the practice if “disguised remuneration, stopping investment companies retrospectively changing the currency they prepare their accounts in for tax purposes, and tackling businesses who artificially split the supply of services to cut VAT bills.

In addition, Treasury exchequer secretary David Gauke has asked Graham Aaronson QC to lead a study into a General Anti Avoidance Rule, with a remit to consider whether a GAAR could deter and counter tax avoidance, while providing certainty, retaining a tax regime that is attractive to firms, and minimising costs for companies and HMRC.

Standard Life head of pensions policy John Lawson says the reforms are likely to impact on large businesses with internal teams of accountants.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Long overdue. The line between avoidance and dishonesty is far too indistinct.
    Money made = tax due. It has never been right to artificially move numbers around to lessen a tax bill. The problem is it has been allowed to become an ‘industry’, and that will be hard to abandon. There will be blood on the boardroom floors!

  2. Simon Mansell warns of 1984 6th December 2010 at 1:49 pm

    I fundamentally disagree with Anonymous 06 Dec 1:10 pm

    It has long been a fundamental understanding that tax can be avoided but not evaded:

    “No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or his property as to enable the Inland Revenue to put the largest possible shovel into his stores”.

    Lord Clyde in his famous judgment in the case of Ayshire Pullman Motor Services V Inland Revenue Commissioners 1929

    Lord Clyde’s judgment was written in 1929 and George Orwell’s prophetic nightmarish vision was written 20 years later in 1949. In his book “1984” Orwell gave us a warning of the power of BIG BROTHER. 1984 has come and gone, but in 2004 came the Finance Act!

    This is what Orwell said:

    The country is ruled by a figure called Big Brother. Winston Smith is a member of the Outer Party, working in the Records Department of the Ministry of Truth. His job is to rewrite documents and alter records and newspaper articles (political correctness). Winston begins to become sceptical of the ruling dictatorship of the party. There were so-called telescreens in each room, showing propaganda and political pamphlets, which had a built in camera and microphone to watch over the citizens. The citizens were under reporting requirements. Winston made the mistake of trusting to O’Brien, a member of the Inner Party, of whom he thought that he might also stand critic to the regime. Little does Winston known – O’Brien is reporting to BIG BROTHER!

    The disclosure rules introduced in Finance Act 2004

    The Finance Act 2004 specifically obliges tax advisers to inform the Inland Revenue of tax avoidance schemes discussed and taken up. This is the first time a UK government has operated in this way, and we suspect that it may be the way of the tax world for years to come! The regulations do not only cover packaged tax avoidance products: one-off bespoke tax planning will now fall within the scope of what is disclosable to the Inland Revenue.

    It might be useful first to give readers a brief reminder of the way that the regime operates. The essential feature of the regime is that it imposes the primary reporting obligation on the tax adviser. An adviser who has devised an avoidance scheme is under an obligation to provide details of the scheme to the Revenue within five days of the scheme first being ‘made available for implementation’. There is a penalty of up to £5,000 for failure to make the necessary disclosure. The Revenue wants to know about ways in which advisers have managed to exploit what the government perceives as loopholes in the legislation, so that “appropriate” action can be taken. Practitioners should be in no doubt that they fall squarely within the reporting requirements! If the tax advantage arises through planning which a ‘promoter might reasonably be expected to keep confidential it will still be disclosable.

  3. FSA are the same as the treasury 6th December 2010 at 1:53 pm

    The “Treasury” says the measures are a “necessary step” to protect the Exchequer and maintain “fairness” for taxpayers! PULL THE OTHER ONE!

    OK so the Treasury appoint the FSA board. The FSA invent RDR and RDR wants fees where 20% VAT will be paid. So hows that for fairness for taxpayers?

  4. Clive, I dont think HMRC are going to look at BW schemes.

  5. Fairness for taxpayers ? Pull the other one.

    Us minions pay tax due whilst the Alistair Darlings of this world ‘flip their homes’ as many times as necessary to EVADE paying CGT. Yes, EVADE not avoid, and he still walks free.

    It’s one law for us and another for the politicians !

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