Though the timing is rather politically convenient, bringing welcome news for Liberal Democrats just ahead of the tuition fees vote, the substance of today’s news on tax avoidance is very welcome.
Two steps are being taken immediately with another three to follow and, crucially, a study into introducing a General Anti-Avoidance Rule (GAAR) has also been commissioned.
This review will be carried out by Graham Aaronson QC and consider whether “it could deter and counter tax avoidance, whilst providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for businesses and HMRC”.
The two immediate steps are:
- preventing groups of companies using intra-group loans or derivatives, to reduce the group’s tax bill, and,
- addressing schemes where a company does not fully recognise certain amounts in its accounts involving loans and derivatives.
The three further measures to come are:
- addressing the practice of 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 reduce VAT.
The Treasury’s press release states:
These announcements will protect forecast revenues estimated at up to £5billion over the next 4 years, and are expected to raise over £2billion in additional revenue during the course of this parliament.
Full details of the estimated financial impact of the measures will be certified by the Office for Budget Responsibility as part of the 2011 Budget process.
A consultation was also published today on bringing inheritance tax on transfers of property into trust within the tax avoidance disclosure regime.
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12 Comments
addressing the practice of disguised remuneration – does that mean that company directors will now be stopped from forgoing a wage which is taxable and taking dividends instead which can be paid abroad and aren’t taxes.
Tax avoidance isn’t my area so I might have this wrong but I’m trying to remember a recent TV documentary explaining how Osborne’s father had built up an offshore trust fund for his boy but then maybe they were saying the millions in the trust fund was free of inheritance tax because it had been offshored.
No doubt someone will either correct me or explain more fully.
“…are expected to raise over £2billion in additional revenue during the course of this parliament.”
Great news, £4bn more and the coalition will have managed to get back to where it started.
http://www.thisismoney.co.uk/news/article.html?in_article_id=514832&in_page_id=2
@Ecojohn
George Osborne is indeed, named by the tax protestors as someone who avoids paying their full tax liability.
See : Tax avoidance: George does it too?
http://blog.38degrees.org.uk/2010/10/28/tax-avoidance-george-does-it-too/
This is an issue where everyone should write to their MP, unless they support the view expressed by the billionaire Leona Helmsley who famously said:
“We don’t pay taxes. Only the little people pay taxes”
I seem to recall, “allegedly” some cabinet minister, using British Virgin Island Domiciled companies to purchase UK properties, thus avoiding any capital gains tax.
It’s about time these countries, that have more registered businesses and bogus companies than they do residents, are shut down.
And that should include bogus investments in film funds, that provide tax avoidance investments.
And any British MP or Peer who is found to be using these tax havens should be forced to resign.
Presumably, Mark, that should be “GAAR”, not “GARR”?
Either way, it sounds like something Captain Redbeard Rum would say. Appropriate perhaps.
By the way, is that £2bn a year, or a cumulative £2bn over the next 5 years? This government has an irritating habit of muddling up revenue and expenditure figures in whatever way it thinks will sound better; but £400m a year would certainly not be worth getting excited about.
Good point Malcolm. Post corrected with added pirate language.
Re. £2bn – I took “during the course of this parliament” to mean it is £2bn in total over the next four years. Didn’t see anything in their news release to suggest otherwise.
There are dozens of examples of companies doing business in UK, but paying their taxes to another government.
Google UK Ltd. is based in London.
British market. British regulations. British court system for commercial disputes. British employment regulations. The directors enjoy British lifestyle – the theatres, the arts, the museums, the infrastructure. But Google UK Ltd (based in London) divert the advertising revenue to Ireland, thus avoiding paying for the benefits of trading in the British market.
Cadbury’s, who do great business selling their products to the British public, are now planning move their HQ to Switzerland. They will only have to pay around half the tax they should pay. Even the Daily Mail are concerned:
http://www.dailymail.co.uk/news/article-1335774/Cadburys-Swiss-avoid-British-tax-cost-Treasury-60-million-year.html#ixzz17NYfyihq
@RichardSM
Exactly – if the government was serious it would crack down on these and other examples – whether Vodafone (and there are plenty of other examples) for example does or does not owe a large amount of tax, what is true is that it funnels operations through Luxembourg to avoid taxation.
Alternatively, switch taxation to economic rent – the one source that is impossible to avoid.
It’s disgraceful that we allow the sale of our Big British Companies, To other foreign companies, only for them to just move the centre of operations to another country, thus avoiding paying less corporation tax.
Or Big British Businesses, signing over the ownership of their company, to their wives, who are Monaco domiciled and thus avoiding uk corporation tax.
This measly £400 million a year the government says it is going after, is a drop in the ocean.
@ Andrew Duffield
“economic rent – the one source that is impossible to avoid.” Bet it would be so badly drafted so that they would find a way.