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The Government has reiterated its commitment to combating legal tax dodging by announcing of number of measures that include the possibility of a general anti-avoidance rule (GAAR).
With immediate effect, groups of companies will be prevented from using intra-group loans or derivatives to reduce their tax bills, and schemes in which a company does not fully recognise certain amounts in its accounts involving loans and derivatives are to be addressed.
Three further measures will:
- look at the practice of disguised remuneration;
- stop investment companies retrospectively changing the currency they prepare their accounts in for tax purposes; and
- tackle firms that artificially split the supply of services to reduce VAT.
In addition, leading tax barrister Graham Aaronson QC is to lead a study into a GAAR to consider whether such a rule could deter and counter tax avoidance while providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for businesses and HMRC.
News of the measures – which follow September's £900 million pledge to the fight against tax cheats and are expected to glean up to £5 billion over the next four years – were immediately met with criticism from throughout the taxation sector.
'The problem with GAARs is that they sound great in principle... but in practice they can be very difficult to implement effectively,' said Jane McCormick, head of corporate tax at KPMG.
'GAARs... are increasingly common overseas, but other jurisdictions’ experiences do not bode particularly well for the UK. There is no one country we can look to for a blueprint of a well-functioning regime to emulate'
The head of the CBI’s tax committee, Will Morris, said a GAAR 'would not be in the interest of the Government, taxpayers, or UK competitiveness. It would introduce a very unwelcome element of uncertainty to the tax system.’
The general secretary of the Public and Commerical Services Union, Mark Serwotka, questioned ministers’ commitment to tackling tax avoidance, saying they should be hoping to ‘targeting ten times’ the estimated amount in unpaid tax that the new measures hope to retrieve.
He added: ‘This government, shamefully, has very little interest in challenging wealthy individuals and big businesses who deprive our economy of tens of billions of pounds by dodging paying taxes they owe.’
