Tackling tax avoidance

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

  • David Langshaw 22nd Jun '10 - 7:44pm

    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”

    I take it you don’t have an ISA then?

  • Author Name 23rd Jun '10 - 1:20am

    @ 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.

  • Andrea Gill 23rd Jun '10 - 9:36am

    One good thing about VAT is it cannot be evaded…

  • Andrew Suffield 23rd Jun '10 - 12:43pm

    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.

  • David Langshaw 23rd Jun '10 - 7:55pm

    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.

  • 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

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