Thought I’d post up this news release from the Treasury as I’ve seen several people asking questions along the lines of ‘what happened to tackling tax avoidance?”
As set out in the Coalition Agreement, the Government is committed to making every effort to tackle tax avoidance.
The Government will take a more strategic approach to the risk of avoidance to prevent increasing complexity and reduce the need for frequent legislative change. In this context, the Government is tackling long-standing avoidance risks in a way that makes it clear what result the legislation intends to achieve. The Government will continue to shut down avoidance schemes as they emerge.
Accounting derecognition
The Government today announces, with immediate effect, an extension to the rules dealing with “derecognition” of loan relationships and derivative contracts. These schemes involve profits arising to a company from a financial asset falling out of account for tax from the “derecognition” of a loan or derivative. The Government will also shortly publish a Technical Note setting out proposals to provide a more generic rule to counter avoidance schemes involving “derecognition”.
Avoidance involving Authorised Investment Funds
The Government today announces, with immediate effect, an anti-avoidance measure to prevent corporate investors using Authorised Investment Funds for avoidance schemes designed to create a credit for UK tax where no UK tax has been paid.
A General Anti-Avoidance Rule
As part of an approach to develop sustainable responses to avoidance risk, the Government intends to examine whether the option of a General Anti-Avoidance Rule should form one element of strengthened defences. This will be part of wider work on improvements to the tax policy-making process.
The Disclosure of Tax Avoidance Schemes regime
The Government will consult over the summer on bringing inheritance tax on trusts within the Disclosure of Tax Avoidance Schemes regime.
Stamp duty land tax
The Government today announces that it will examine whether further changes to the rules on stamp duty land tax on high value property transactions are needed to prevent avoidance in this area.
Use of trusts to reward employees
The March 2010 Budget announced action to tackle arrangements using trusts and other vehicles to reward employees which seek to avoid, defer or reduce liabilities of employees and directors to income tax and National Insurance Contributions or to avoid restrictions on pensions tax relief. The Government confirms that Employer Financed Retirement Benefit Schemes are within the scope of this measure. Legislation will take effect from April 2011.
Life insurance companies
The Government today confirms that with immediate effect, the anti-avoidance rule preventing the manipulation of previously unrecognised profits to avoid tax will also have effect where life insurance business is transferred to another company.
Consortium relief
As announced at the March 2010 Budget the Government will introduce an anti-avoidance measure to counter the manipulation of the consortium relief rules. This measure will take effect from the date of the publication of draft legislation. This prevents consortium members accessing relief for a greater share of consortium losses than their actual involvement should entitle them to.
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10 Comments
There is nothing wrong with tax AVOIDANCE, Mark! For example, I avoid cigarette duty by not smoking. However, tax EVASION is a criminal offence. There is nothing wrong, morally, economically or politically, in “playing to the whistle” on tax matters, and arranging one’s affairs to minimise the tax take – but that is a long way removed from a criminal offence. The Government is deluding itself if it thinks otherwise.
David, there is nothing legally wrong with tax avoidance, but it is morally reprehensible – for the same reason that walking on by while someone lies in the gutter is. The rich and powerful should not have the advantage of being able to pay less tax just because they can afford to hire smart-arse accountants and lawyers who can spot loopholes in the law.
“David, there is nothing legally wrong with tax avoidance, but it is morally reprehensible”
I take it you don’t have an ISA then?
@ Cllr Mark Wright
Very true, it’s simply a pity that morals are only enforced in the ‘courts’ of public opinion and don’t seem to matter/apply to the rich and powerful. The ‘do as I say not as I do’ exception obviously applies.
One good thing about VAT is it cannot be evaded…
Want to bet? Auditing VAT forms for evasion is one of the most common activities for accountants in this country. Businesses evade VAT all the time (if you get caught, you just claim it was an error and pay up the difference, they let you get away with that).
Can I suggest that the person who thinks that tax avoidance is “morally reprehensible” sends the government a few bob to cover the tax they’ve avoided today by not going for a long ride in a car? Perhaps they’d like to send in something for the tax they’ve avoided by not buying more chocolate, or their morally reprehensible activities in avoiding income tax by not getting a better paid job? Then they could bung the state something for their not being an alcoholic.
Or just get the message – there is nothing whatsoever in any way morally wrong in not paying tax for which you are not liable.
A quotation from a famous court case on Taxation:
“No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.”
James Avon Clyde, Lord Clyde, Ayrshire Pullman Motor Services and Ritchie v. IRC (1929) 14 TC 754.
There is Tax Fraud, Tax Evasion, Tax Avoidance and tax avoidance, and they’re all different. Tax Avoidance Schemes are legally required to be registered and there are (currently weak) penalties for failing to register. Avoiding a trip in a car is not a Tax Avoidance Scheme, even if there is an argument of logic that it could be tax avoidance. Taking out an ISA in the way intended by Parliament is not the same as setting up a complicated series of companies and off-shore trusts in order to switch taxable income into some other form of receivable money that isn’t subject to tax, in a way that Parliament did not anticipate.
Walking, ISAs and offshore trusts are all legal. The difference is the first two involve participating comfortably in society, whereas the latter is a matter of who has the spikiest, cleverest lawyers. The latter is a different game. It’s a subjective issue as to whether it is ‘morally acceptable’ or not and I suspect it is always going to be part of the down side of having a code of laws interpreted by a judiciary. The reason for this view is set out quite clearly here: http://en.wikiquote.org/wiki/Tax_avoidance_and_tax_evasion and is also aptly summed up in the previous post.
Still, accepting it as a fact of life does not mean we should just give up. For example, take the capital gains tax regime. Nick Clegg recently sent us an email saying there were no loopholes. But, there *is* entrepreneur’s relief, which wafts the smell of freshly baked croissants like a supermarket breeze over anyone in the tax avoidance industry. I suspect this is more a case of Nick being misinformed rather than disingenuous. Until our legislators take a more aggressive interest in the issue we will continue to have the situation where the wealthy pay less tax as a proportion of their income than those on more modest incomes. Tackling it more strongly will start a lawyerly arms race, but it is one where the gains will be massively in favour of the majority taxpayer for a long time before any equilibrium is reached between the cost of the lawyers and the tax raised.
… in my humble opinion, which isn’t terribly well informed, but some of the earlier posts needed, er, clarifying.
I was so pleased to read of the numerous measures the Coalition are taking regarding tax evasion and tax avoidance. I trust this will significantly reduce the annual £40billion taken out of our economy each year by the tax cheats.
Mike Smith