In this final instalment considering the draft clauses from the Finance Bill 2016 most relevant to financial planners, I am going to turn my attention to the ever-popular subject of tax avoidance and evasion. Every Budget and Finance Bill has plenty to say on this subject. As in the previous articles in the series, I will break down my consideration into the headings used in the HM Revenue & Customs overview of the draft legislation for consultation.
Anti-avoidance: Penalties for the general anti-abuse rule
Legislation will be introduced in the Finance Bill 2016 for a new penalty of 60 per cent of tax due to be charged in all cases successfully counteracted by the GAAR in order to create a disincentive from entering into abusive tax avoidance. The Government will also make small changes to the GAAR procedures to improve its ability to tackle marketed avoidance schemes. A response to the consultation was published on 9 December 2015.
The GAAR has been a bit of a sleeping giant so far. However, it is a really important part of the Treasury’s multi-faceted strategy to combat aggressive avoidance, along with targeted anti-avoidance rules, naming and shaming, disclosure of tax avoidance schemes and accelerated payment notices.
Serial avoiders and promoters of tax avoidance schemes
As announced in the Summer Budget 2015, and following consultation over the summer, legislation will be introduced in the Finance Bill 2016 that will tackle those who persistently enter into tax avoidance schemes that are defeated by HMRC.
After the first such defeat, the taxpayer will have to comply with a special reporting requirement and further defeats will result in a surcharge. After at least four defeats the names of the defeated avoiders can be published and, for those whose defeats concern the persistent abuse of reliefs, restrictions on them accessing certain tax reliefs for a period will be applied. These measures will come into effect on 6 April 2017.
Legislation will also be introduced in the Finance Bill 2016 to widen the promoters of tax avoidance schemes rules. Under the legislation a promoter may be made subject to the reporting requirements and obligations of the Potas regime if their schemes are regularly defeated by HMRC. This measure will come into effect at Royal Assent of the Finance Bill 2016. A response to the consultation on these measures was published on 9 December 2015.
Special measures to tackle high-risk businesses
In the Summer Budget 2015, the Government announced new measures to improve large business tax compliance, with a consultation over the summer to refine the detail of the measures. The Autumn Statement confirmed, following consultation, legislation will be introduced in the Finance Bill 2016 to enable HMRC to use special powers to tackle businesses that persistently engage in aggressive tax planning. The legislation will have effect after Royal Assent of the Finance Bill 2016. A response to the consultation was published on 9 December 2015.
New civil sanctions for enablers of offshore evasion
As announced in the Autumn Statement, and following consultation, legislation will be introduced in the Finance Bill 2016 to introduce new civil penalties for individuals and businesses which deliberately enable offshore evasion, as well as naming provisions for the most serious enablers. A summary of responses to the consultation was published on 9 December 2015.
Strengthened civil deterrents for offshore tax evasion
As announced in the Autumn Statement, legislation will be introduced in the Finance Bill 2016 to increase minimum penalties for deliberate offshore tax evasion, require greater levels of disclosure from tax evaders and increase the naming of offshore tax evaders. The legislation also introduces a new penalty based on the value of the asset that led to the evasion. This will apply to serious cases of deliberate offshore tax evasion. A response to the consultation was published on 9 December 2015.
A new criminal offence for tax evasion
As announced in the Autumn Statement, legislation will be introduced in the Finance Bill 2016 to provide a new criminal offence that removes the need to prove intent for offshore tax evaders. This will apply to only those with significant levels of non-compliance who cannot satisfy the courts they have taken reasonable care to comply with their UK tax obligations. A response to the consultation was published on 9 December 2015.
A new legal requirement to correct past offshore tax non-compliance
As announced in the Autumn Statement, the Government will consult on a new legal requirement for taxpayers to come forward and correct any past offshore non-compliance with associated penalties for failure to do so. The new requirement will underpin the new tougher offshore disclosure facility and operate ahead of the widespread reporting of information under the Common Reporting Standard in 2018.
A new corporate offence for failure to prevent the criminal facilitation of tax evasion
As announced in the Autumn Statement, the Government will consult on draft legislation to create a new criminal offence to apply where a corporation fails to prevent those representing it from criminally facilitating tax evasion. A response to the first consultation was published on 9 December 2015.
Most of the above will not be of direct relevance to advisers but such relentless anti-avoidance measures should serve as a reminder to stick with the tried and tested and legislatively permitted.
Tony Wickenden is joint managing director at Technical Connection