The new rules include further “naming and shaming” powers for HMRC, a review into inheritance tax, and over 20,000 more accelerated payment notices (APNs).
In his address, Osborne introduced a revamp of the Disclosure of Tax Avoidance Schemes (DOTAS) regime, adding powers for HM Revenue & Customs to identify users of undisclosed avoidance schemes and publish detailed information about promoters and schemes as well as increased penalties on those who fall under DOTAS requirements.
The Government will also toughen its stance against those who repeatedly enter tax avoidance schemes, with a special reporting requirement and surcharge on users with inaccurate tax returns.
It said it also plans to release an additional 21,000 APNs on top of the 43,000 it originally intended to release over the coming year.
“The Government will introduce tougher measures for those who persistently enter into tax avoidance schemes that fail, and will develop further measures to publish the names of such avoiders and to tackle avoiders who repeatedly abuse relief,” the Budget report said.
“[It] will also widen the current scope of the promoters of tax avoidance schemes regime by bringing in promoters whose schemes are regularly defeated by HMRC.”
Tax-geared penalty
A “tax-geared penalty” will also be introduced to tackle cases handled by the General Anti-Abuse rule, the list which identifies abusive tax arrangements.
Legislation which enables the Revenue to issue conduct notices to a broader range of connected persons under the promoters of tax avoidance schemes regime is also being created.
In his speech, Osborne will also launch a review into the use of deeds of variation for the purposes of tax avoidance. A deed of variation allows beneficiaries of a deceased’s estate to alter the distribution of that estate.
Osborne said that £5bn of the £30bn the UK needs to raise in savings by 2017-18 will come reclaiming money lost to tax avoidance, evasion, and aggressive tax planning.
“Taken together, all the new measures against tax avoidance and evasion will raise £3.1bn over the forecast period,” he said.
“The chief secretary will tomorrow publish further details for those professionals who assist them.
“Let the message go out: this country’s tolerance for those who will not pay their fair share of taxes has come to an end.”
Misunderstanding
Andrew Watters, director at law firm Thomas Eggar, said the Government’s tougher measures on persistent tax avoiders demonstrates its failure to understand what is meant by avoidance.
“Those who have invested in film partnerships or enterprise zone allowances are regularly branded as tax avoiders as they avoid tax that would otherwise be payable,” he said. “Yet other parts of the Budget have increased Film Tax relief and announced new enterprise zones, presumably to encourage investment by giving tax advantages.
“The announcement that the APNs regime is to be used more widely than previously announced suggests HMRC is being encouraged to view ‘avoidance’ in broad terms.”
Sean Bannister, senior associate, tax, at Edwin Coe said today’s Budget represents a further attack by the government on tax avoidance.
“Today we saw a promise to raise revenues by £3.1bn as a result of closing down what many in the political establishment saw as ‘loopholes’. Despite most of the Chancellor’s comments being focused on corporates avoiding tax in the UK, individuals will also be affected,” he said.
“The rules relating to the use of deeds of variation in relation to IHT mitigation are to be reviewed with a view to restricting or preventing their use. Once the review is complete, it may be a timely opportunity for taxpayers concerned about IHT to review their affairs and if nothing else ensure their Will maximises the available reliefs.”
Hard to swallow
James Quarmby, private wealth and tax at law firm Stephenson Harwood, said he found the plans to introduce new rules to combat tax evasion and avoidance “hard to swallow”.
“These new rules can lead to prison time for people who make honest mistakes and that just does not feel right,” he said. “If that wasn’t bad enough, the proposal to criminalise people for a ‘failure to act’ is even worse.
“It is ironic that this highly illiberal proposal has come from none other than the Liberal Democrat Party.”
Dawn Register, partner, Tax Dispute Resolution, at BDO, said: “Naming and shaming proposals seem rather redundant when the media to do such a good job at exposing people who use avoidance schemes.
“Alongside avoiders, there are measures to beef up the powers to expose promoters of aggressive tax avoidance schemes. Ultimately HMRC will want many of these boutique firms to go out of business and to warn people off using such schemes.”
