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November 25, 2013 12:06 am
The number of avoidance schemes disclosed to HM Revenue & Customs has fallen by more than a third in the past year to an all-time low, in a sign of a change in approach by tax planners.
HMRC has seen a move away from artificial and contrived planning, but some companies are now attempting to cut their bills in other ways, a senior official said last week.
He said: “We have detected a move away from avoidance behaviour, but some have moved into boundary pushing.”
An example was the attempt – blocked by legislation in May – by utility companies to claim capital allowances for past expenditure by customers.
The comments coincided with an appeal by a Treasury minister for an end to the “myths and misunderstandings” about corporate tax avoidance. He said the debate was risking jobs and investment.
David Gauke, exchequer secretary, said companies had been wrongly criticised for legitimate behaviour such as claiming capital allowances, which was unhelpful at a time the government was trying to incentivise investment from companies sitting on cash deposits of more than £500bn.
The number of tax planning schemes disclosed to HMRC fell from 121 to 77 in the year to September, according to figures obtained by Pinsent Masons, the international law firm. The disclosures, made under rules that give the tax authority early warning of new schemes, have been falling ever since their introduction in 2004-5 when 587 were disclosed.
Jason Collins, head of tax at Pinsent Masons, said that companies and high-earning taxpayers might still look for new ways to minimise their tax bills but the figures showed that HMRC was “winning the battle, if not the war, to eliminate elaborate tax schemes”.
The move away from contrived and artificial schemes has accelerated as a result of a public backlash, heightened reputational risks for tax avoiders, a new anti-abuse rule, a move to block tax avoiders from public contracts and a code of conduct for banks which used to facilitate many schemes. But some advisers reported signs of a revived appetite for tax planning by businesses.
Rupert Shiers, of Hogan Lovells law firm, said:"Corporates are thinking again about tax planning – not artificial planning which seems dead, but business-related planning."
Margaret Hodge, who chairs the Commons public accounts committee, has called on HMRC to become far more aggressive. Speaking at a Tax Journal conference last week, she said the tax authority was in a “David and Goliath world” in addressing certain types of behaviour, and would never catch up.
Mr Gauke rejected many of the criticisms put forward by Ms Hodge and other campaigners. He said there was not a “shred of evidence” that big accountancy firms had undue influence over HMRC and said claims that it had undertaken sweetheart deals had been discredited.
The Revenue did not lack the will or resources to tackle non-compliance by high-risk large companies, which were under especially close scrutiny. Critics often mistakenly took HMRC’s public silence on specific cases as confirmation that no action was being taken.
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