March 23, 2011 10:34 pm

Avoidance crackdown to raise £1bn a year

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The crackdown on tax avoidance announced on Wednesday will raise £1bn a year and amounts to more than had been done “in any Budget in recent years”, George Osborne said.

He said not enough had previously been done to tackle the injustice of avoidance and evasion, as he announced measures “to shut down the open abuses that have been allowed to continue for too long”.

The chancellor highlighted plans to scrutinise “the taxation of very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share”, along with plans to close down three forms of stamp duty land tax avoidance.

But Bill Dodwell of Deloitte, the professional services firm, said he was surprised and disappointed the government had not taken action to stop avoidance of stamp duty by people using companies to buy residential property.

Lord Oakeshott, a Liberal Democrat peer, said stamp duty avoidance was a “major scandal” and that he was concerned the government was dragging its feet on taking action to end it.

The biggest anti-avoidance measure was a crackdown on “disguised remuneration”, which often involved highly paid employees being offered tax-free, lifetime loans that were never repaid.

Advisers said there was still uncertainty about the full scope of the measures, even though the Budget confirmed that draft legislation had been amended so as to avoid being used in cases that were not driven by tax avoidance.

Nicholas Stretch of CMS Cameron McKenna, a law firm, said: “Companies operating bona fide employee share and bonus plans generally are still waiting for formal reassurance that their reward schemes will not be caught and cause tax to be payable before employees receive bonuses or shares.

“It is extremely disappointing the Revenue [HM Revenue & Customs] have not made more progress on this over the last few months – it is causing needless uncertainty.”

Colin Ben-Nathan of the Chartered Institute of Taxation said: “We are disappointed the government has not heeded calls to reconsider the approach adopted. As things stand, the proposals remain a very blunt instrument and . . . we fear they are still very likely to impact employers and employees in ways that are not intended.”

In a new strategy paper on tackling tax avoidance, HMRC said it focused on prevention at first, then early detection and making an effective challenge, and that it was still considering the case for a general anti-avoidance provision.

Andrew Hubbard of RSM Tenon, an accountancy firm, said the paper provided “further indication that HMRC is intent on changing behaviour”.

James Bullock of McGrigors, a law firm, highlighted a proposal in which people in disputed tax avoidance cases would have to pay a penalty if they had not paid the tax “up front”. This would “impose a significant disincentive to taxpayers undertaking aggressive forms of planning”, he said.

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