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Exchequer Secretary to the Treasury David Gauke today likened the promoters of aggressive tax avoidance schemes to cowboy builders, as he revealed plans to crack down on abusive tax planning.
The government is aiming to increase pressure on advisers who market abusive schemes that artificially reduce tax, such as the paying loans in lieu of salaries through shell companies, announced Mr Gauke in a speech to Policy Exchange, a leading think-tank.
The new plans include a sort of ‘naming and shaming’: published warnings about schemes that are effectively being missold, making it easier for taxpayers to identify contrived planning and its promoters.
There will also be a strengthening of the disclosure of tax avoidance schemes (DOTAS) rules, giving HMRC greater powers to force promoters of any aggressive avoidance scheme to name its users, and more easily impose penalties for failure to provide such information.
The proposals follow the recent furore over avoidance that saw more than a thousand wealthy individuals – most prominently, the comedian Jimmy Carr – being castigated in the media for the use of the Jersey-based K2 scheme.
‘Those who have engaged in tax avoidance have received their share of public scrutiny recently, to say the least - but often it is the firms that market such schemes that are the root of the problem,’ said Mr Gauke.
He claimed that the caution and acumen individuals usually display when hiring tradespeople frequently deserts them when it comes to tax advisers.
‘If I find out my builder has changed trade names three times, avoids informing the planning authorities, and includes in his fee a “litigation fund”, I might be tempted to find another builder – but all too often there is not the same awareness around tax advisers,’ said the Treasury secretary.
‘If a tax adviser tells you something that sounds too good to be true, it probably is too good to be true.’
This year’s Budget launched a range of anti-avoidance measures that together are expected to bring in around £1bn and protect a further £10bn in future revenues from the tax avoidance industry over the next five years.
Moves announced in March by the chancellor, George Osborne, included the end to the use of companies to buy expensive residential property, thereby avoiding stamp duty land tax (SDLT).
HMRC plan to amend the DOTAS for SDLT from 24 September 2012, and have published draft legislation that sets out the proposed amendments.
Two sets of regulations are involved. The first, which deals with the prescribed descriptions of arrangements, will be amended so as to:
- remove the transaction value thresholds;
- remove the ‘grandfathering’ rule for certain arrangements involving the transfer of rights legislation; and
- update the list of excluded arrangements.
The second amendment will be made to the specified proposals or arrangements regulations.
It will modify how FA 2004, s 308 applies in certain circumstances, meaning a promoter who made disclosures before April 2010 of arrangements involving the ‘transfer of rights’ legislation will have to make further disclosures if the arrangements continue to be made available.
Questions and comments on the technical accuracy of the draft regulations should be emailed no later than 20 August.
