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The coalition Government has reiterated its commitment to making every effort to tackle tax avoidance, and it has pledged to take ‘a more strategic approach’ to the risk of tax avoidance, to prevent increasing complexity and reduce the need for frequent legislative change.
In this afternoon’s Budget, the Treasury announced a number of measures to fulfil this pledge, including an extension, with immediate effect, to the rules dealing with ‘derecognition’ of loan relationships and derivative contracts: schemes that involve profits arising to a company from a financial asset falling out of account for tax from the ‘derecognition’ of a loan or derivative.
Ministers are expected to soon publish a technical note setting out proposals to provide a more generic rule to counter avoidance schemes involving ‘derecognition’.
The Treasury also today unveiled an anti-avoidance measure – to take effect immediately – 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.
The Government intends to examine whether the option of a general anti-avoidance rule should form one element of strengthened defences – and ministers will consult over the summer on bringing inheritance tax on trusts within the disclosure of tax avoidance schemes regime.
With regards to the possibility of a general anti-avoidance rule (GAAR), John Whiting, the CIOT tax policy director of the Chartered Institute of Taxation, said, 'We are happy to examine the idea of a GAAR, although the underlying concerns that existed when this was looked at in 1999 remain: to provide certainty, a clearance mechanism would be needed; to provide fairness, some of the existing clutter of anti-avoidance rules would have to be abolished.'
Other moves announced in today's 'emergency' Budget include an examination of whether further changes to the rules on stamp duty land tax on high-value property transactions are needed to prevent avoidance in this area.
And an anti-avoidance rule to prevent the manipulation of previously unrecognised profits to avoid tax is to have effect where life insurance business is transferred to another company.
Avoidance via the use of trusts to reward employees and consortium relief are also to be addressed.
