The government’s efforts to tackle tax avoidance are ‘quite understandable’ but evasion and other criminal activity have a ‘far greater’ impact than legal avoidance, tax experts said in response to a new paper setting out the government’s anti-avoidance strategy.
The government’s efforts to tackle tax avoidance are ‘quite understandable’ but evasion and other criminal activity have a ‘far greater’ impact than legal avoidance, tax experts said in response to a new paper setting out the government’s anti-avoidance strategy.
The government is committed to a more strategic approach than its predecessors, one that ‘gets to the root of the problem, rather than treating the symptoms’, David Gauke said in a foreword to ‘Tackling tax avoidance’.
The Exchequer Secretary to the Treasury said this week’s Budget unveiled an ambitious package of measures:
a new anti-avoidance strategy;
the first announcements of reviews in high risk areas of the tax system;
options to reduce the cash flow advantage from using avoidance schemes; and
targeted responses to specific avoidance risks.
Vincent Oratore, President of the CIOT, said the government’s operational approach to tackling avoidance ‘seems quite understandable in the current environment’.
But he added that ‘we would urge the government not to lose sight of evasion and other criminal activity which has a far greater impact on exchequer revenues’.
Cash flow advantage Action to ‘strengthen defences in legislation’ involves reviews of ‘high risk areas’ of the tax code and consultation on proposals to ‘remove the cash flow advantage that tax avoiders can get’ by using high risk avoidance schemes, the Treasury said.
‘At present, a minority exploit the cash flow advantage of retaining tax during a dispute over liability, in some cases, even where the courts have already ruled against similar transactions.
‘The government is determined to address this systemic advantage to reduce the appeal of participating in high risk avoidance.’
Users of schemes will be encouraged to pay the disputed tax earlier than is currently required, or ‘will face an additional charge for late payment of the tax when it is found to be due’.
Adam Craggs, Tax Partner at Reynolds Porter Chamberlain, said: ‘Previously taxpayers using a tax avoidance scheme that was later found not to work would be charged interest but not usually a penalty. That meant investors in such a scheme could “take a punt” on whether the scheme would work.’
He added: ‘There will now be a significant disincentive for taxpayers to use aggressively marketed tax avoidance schemes.’
Strategy HMRC’s ‘new anti-avoidance strategy’ will focus on three core elements, the paper said:
preventing avoidance at the outset where possible;
detecting it early where it persists; and
countering it effectively through challenge by HMRC.
The paper confirmed that the study group examining the case for a general anti-avoidance rule will complete its work by 31 October 2011 and report its conclusions to the Exchequer Secretary. The government has ‘committed to further, formal consultation if the proposal is taken forward’.
The government’s efforts to tackle tax avoidance are ‘quite understandable’ but evasion and other criminal activity have a ‘far greater’ impact than legal avoidance, tax experts said in response to a new paper setting out the government’s anti-avoidance strategy.
The government’s efforts to tackle tax avoidance are ‘quite understandable’ but evasion and other criminal activity have a ‘far greater’ impact than legal avoidance, tax experts said in response to a new paper setting out the government’s anti-avoidance strategy.
The government is committed to a more strategic approach than its predecessors, one that ‘gets to the root of the problem, rather than treating the symptoms’, David Gauke said in a foreword to ‘Tackling tax avoidance’.
The Exchequer Secretary to the Treasury said this week’s Budget unveiled an ambitious package of measures:
a new anti-avoidance strategy;
the first announcements of reviews in high risk areas of the tax system;
options to reduce the cash flow advantage from using avoidance schemes; and
targeted responses to specific avoidance risks.
Vincent Oratore, President of the CIOT, said the government’s operational approach to tackling avoidance ‘seems quite understandable in the current environment’.
But he added that ‘we would urge the government not to lose sight of evasion and other criminal activity which has a far greater impact on exchequer revenues’.
Cash flow advantage Action to ‘strengthen defences in legislation’ involves reviews of ‘high risk areas’ of the tax code and consultation on proposals to ‘remove the cash flow advantage that tax avoiders can get’ by using high risk avoidance schemes, the Treasury said.
‘At present, a minority exploit the cash flow advantage of retaining tax during a dispute over liability, in some cases, even where the courts have already ruled against similar transactions.
‘The government is determined to address this systemic advantage to reduce the appeal of participating in high risk avoidance.’
Users of schemes will be encouraged to pay the disputed tax earlier than is currently required, or ‘will face an additional charge for late payment of the tax when it is found to be due’.
Adam Craggs, Tax Partner at Reynolds Porter Chamberlain, said: ‘Previously taxpayers using a tax avoidance scheme that was later found not to work would be charged interest but not usually a penalty. That meant investors in such a scheme could “take a punt” on whether the scheme would work.’
He added: ‘There will now be a significant disincentive for taxpayers to use aggressively marketed tax avoidance schemes.’
Strategy HMRC’s ‘new anti-avoidance strategy’ will focus on three core elements, the paper said:
preventing avoidance at the outset where possible;
detecting it early where it persists; and
countering it effectively through challenge by HMRC.
The paper confirmed that the study group examining the case for a general anti-avoidance rule will complete its work by 31 October 2011 and report its conclusions to the Exchequer Secretary. The government has ‘committed to further, formal consultation if the proposal is taken forward’.
