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New government clampdown on tax dodgers
The Chancellor of the Exchequer, George Osborne, and the Chief Secretary to the Treasury, Danny Alexander, have recently announced new action to clamp down on tax dodgers.
The action comes ahead of the Chancellor’s Autumn Statement on Wednesday, and includes;
New £77m funding for HM Revenue & Customs (HMRC) in this Spending Review period to expand their anti-avoidance and evasion activity, specifically those focusing on offshore evasion and avoidance by wealthy individuals and by multinationals. This is expected to bring in an additional £2bn per year in tax that would have otherwise gone unpaid;
A groundbreaking agreement with the US, the first of its kind anywhere, that will significantly increase the amount of information on potentially taxable income automatically exchanged between both countries and further enhance HMRC’s ability to tackle offshore evasion. This sets a new standard in international tax transparency aimed at tackling tax evasion and the Government will look to conclude similar agreements with other jurisdictions;
Steps to close the net on the marketers of aggressive tax avoidance schemes, including the introduction of new information disclosure rules and HMRC sanctions for the ‘cowboy’ advisers who sell such schemes;
HMRC is also publishing Closing in on Tax Evasion: HMRC’s approach, which sets out HMRC’s current approach to tax evasion, particularly their use of third party data. Building on this work and a new ‘centre of excellence’ for offshore evasion within HMRC, the department will develop a comprehensive strategy for tackling offshore evasion to be published in spring 2013.
The Chancellor said:
“The Government is clear that while most taxpayers are doing their bit to help us balance the books, it is unacceptable for a minority to avoid paying their fair share, sometimes by breaking the law. We are determined to tackle this problem and HMRC are making good progress, but we are giving them additional tools to bring in more. The action we are announcing today will help HMRC close in not only on those who seek to avoid or evade tax, but on the dubious ‘cowboy’ advisers who sell them the schemes and dodges they use to cheat the law-abiding majority.”
The Chief Secretary said:
“In restoring the public finances, our first priority must be to tackle those who avoid or evade tax. It is simply not fair that at a time when most people are making a contribution to balancing the nation’s books, there is a small minority of taxpayers who try to escape their responsibility. We are therefore investing additional resources into the department so that it can step up its fight against tax dodgers and bring in an extra £2bn per year by 2014/15.”
The HMRC investment package will fund specific activity, including;
Bringing in more people and additional legal support to speed up HMRC’s work to identify and challenge multinationals’ transfer pricing arrangements and further strengthen their risk assessment capability across the large business sector. This will help to ensure that multinationals do not shift profits out of the UK and therefore pay the tax due in accordance with UK tax law;
Expanding HMRC’s Affluent Unit with 100 extra investigators and additional risk and intelligence staff to target avoidance and evasion by the wealthy;
Increasing the number of specialist personal tax inspectors to tackle offshore evasion and avoidance of inheritance tax using offshore trusts, bank accounts and other entities, focusing in particular on the agents and tax intermediaries involved;
A new ‘centre of excellence’ within HMRC to bring together and enhance its expertise in tackling offshore evasion. The team will be made up of HMRC staff and external experts who will look at how HMRC can best use data to identify offshore tax evasion, review HMRC’s legal powers and work with other tax administrations to close the net on offshore evasion;
Improving HMRC’s CONNECT computer system so that the department is able to better identify areas of compliance risk. This will allow HMRC to act swiftly in identifying and investigating fraudulent behaviour;
Increase capacity to tackle aggressive avoidance schemes, including long-running cases involving partnership losses by creating a settlement opportunity that offers a good deal to the Exchequer and proceed more quickly to litigation for cases HMRC does not settle.
The Government is also today announcing steps to move against ‘cowboy’ tax advisers who sell contrived and aggressive tax avoidance schemes to tax dodgers. Following a consultation over the summer on this issue, the Government will;
Consult on proposals to introduce significant new information disclosure and penalty powers to make it more difficult for the marketers of abusive schemes to continue to promote them in the future;
Strengthen the existing Disclosure of Tax Avoidance Schemes (DOTAS) regime in order to improve the information HMRC obtains about avoidance schemes and the people who use them and widen the range of schemes required to be disclosed. The Government will legislate in 2013 to extend the range of information that must be disclosed to HMRC and impose additional sanctions for non-compliance;
The Chancellor will announce further action to close specific tax avoidance loopholes on Wednesday when setting out his Autumn Statement.
Notes for Editors
1. Over this Parliament, taken together with the Spending Review 2010 reinvestment, the Government will have reinvested around £1bn in HMRC and expects them to deliver an additional £22bn in 14/15, £9bn more a year than in 10/11.
2. The UK-US Agreement to Improve International Tax Compliance and to Implement FATCA is an enhanced automatic tax information exchange agreement which sets a new standard in international tax transparency and strengthens HMRC’s ability to tackle offshore evasion.
3. In December 2010, the Government asked Graham Aaronson QC to lead a study that would consider whether a General Anti-Abuse Rule (GAAR) could deter and counter abusive tax avoidance, while providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for taxpayers and HMRC. At Budget 2012 the Chancellor announced that the Government would introduce a GAAR and legislate for it in Finance Bill 2013.
4. The Government published Lifting the Lid on Tax Avoidance Schemes in July 2012. The consultation proposed ideas for action to tackle the promoters of contrived and aggressive tax avoidance schemes. The Government’s response to the consultation will be published later this month.