During the last few Budgets and Autumn Statements the government has made moves to prevent tax avoidance and evasion – and the latest fiscal event was no different.
During this year’s Autumn Statement the Chancellor Philip Hammond announced a number of new measures to tackle businesses that avoid paying tax.
According to Mr Hammond’s new plans, the government will seek to raise an additional £2 billion of tax by 2022 through a range of new policies and rules.
Measures will include targeting incorporated operations and changing small business schemes to end any “inappropriate” use.
It comes after the Office for Budget Responsibility said the growing trend to incorporate businesses was expected to cost the treasury an additional £3 billion by 2021 than had been predicted during the spring Budget in March 2016.
During his speech the Chancellor also reaffirmed that the Treasury would press ahead in April 2017 with cuts to tax breaks for corporate debt and restrictions on loss relief. These are set to raise more than £5 billion from the largest businesses in the UK.
The move will essentially ensure that large businesses “pay tax in years where they make substantial profit”, as well as preventing tax avoidance through excessive borrowing in the UK to fund overseas activities.
Meanwhile, the move to reduce tax deductions for interest costs is likely to affect a large number of international businesses, particularly companies in the property and private equity sectors.
The government will also continue with its plans to tackle “enablers” of tax avoidance schemes that have been defeated in court with the introduction of tougher penalties.
The defence of having relied on advice – in cases where it was not independent – as taking “reasonable care” will be removed when considering penalties for users of avoidance schemes.
Disguised remuneration – where individuals benefit from using offshore trusts to avoid taxes on earnings – will also be tackled more harshly. This move is expected to raise more than £630 million for the Treasury by 2022.
A new tax charge will be created on historic loans drawn from disguised remuneration avoidance schemes that are not paid by April 2019.
The new rules will also deny tax relief on employers’ contributions to disguised remuneration schemes unless tax and National Insurance Contributions were paid within a period, which is yet to be specified.
The Chancellor concluded his speech on tax avoidance with the creation of a new legal requirement to correct past failures to pay UK tax on offshore holdings, which will force taxpayers with offshore interests to check that their filings in the UK are correct.
Link: Autumn Statement