The chancellor has announced a range of new measures designed to tackle and deter tax evasion and the use of abusive tax avoidance schemes.
Serial Avoiders & Scheme Promoters
- A proposal to introduce measures for those who persistently enter into tax avoidance schemes that are defeated by HMRC.
- These include a special reporting requirement and a surcharge on those whose latest return is inaccurate due to use of a defeated scheme, the names of such avoiders being published and, for those who persistently abuse reliefs, restrictions on them accessing certain tax reliefs for a period.
- The government is also widening the Promoters of Tax Avoidance Schemes (POTAS) regime, by bringing in promoters whose schemes are regularly defeated by HMRC.
New criminal offence for tax evasion
- A new criminal offence that removes the need to prove intent for the most serious cases of failing to declare offshore income and gains.
New civil penalties for offshore tax evaders & those who enable evasion
- Increased civil penalties for deliberate offshore tax evasion, including the introduction of a new penalty linked to the value of the asset on which tax was evaded and increased public naming of tax evaders.
New criminal offence for corporates failing to prevent tax evasion
- A new criminal offence for corporates which fail to prevent their agents from criminally facilitating tax evasion by an individual or entity.
An additional requirement to correct past offshore tax non-compliance?
- Consultation on an additional requirement for individuals to correct any past offshore non-compliance with new penalties for failure to do so.
Cash and the hidden economy
- HMRC has published a call for evidence to seek a better understanding of what implications the trend away from cash has for tax compliance, and in particular evasion and the hidden economy.
Tax schemes and strategies
Disguised remuneration
- Action is threatened against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015.
Entrepreneurs’ relief: contrived structures
- The government will consider bringing forward legislation to amend the changes made by Finance Act 2015 to entrepreneurs’ relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions.
GAAR
- The government will introduce a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the General Anti Abuse Rule (GAAR) and will make small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes.
Converting income into capital gains
- The government will publish a consultation on the rules concerning company distributions later in the year.To reduce opportunities for income to be converted to capital to gain a tax advantage, the government will shortly publish a consultation on the company distributions rules, and will amend the Transactions in Securities rules and introduce a Targeted Anti-Avoidance Rule.
Corporate intangibles and partnerships
- The government is aware of tax planning around the intangible fixed assets regime used to obtain more generous corporation tax relief than is intended by the legislation. It will therefore amend the regime to stop arrangements that use partnerships to obtain relief that was not intended.
Capital allowances and leasing
- The government will also amend legislation to counter two types of avoidance involving capital allowances and leasing, which involve businesses artificially increasing the value of their capital allowances or lowering the amount of tax which they pay.
Rules for addressing hybrid mismatch arrangements
- Following consultation, the government will introduce legislation with effect from 1 January 2017 to implement the agreed OECD rules for addressing hybrid mismatch arrangements. The new rules will prevent multinational enterprises avoiding tax through the use of certain cross-border business structures or finance transactions.
Taxation of asset manager’s performance based rewards
- New rules to determine when performance awards received by asset managers will be taxed as income or capital gains.
- An award will be subject to income tax, unless the underlying fund undertakes long term investment activity.
Tools to encourage voluntary compliance and special measures to tackle the highest risk businesses
- Following consultation, the government will legislate to introduce:
- a new requirement that large businesses publish their tax strategies as they relate to or affect UK taxation.
- a special measures regime to tackle businesses that persistently engage in aggressive tax planning.
- a framework for cooperative compliance.
Stamp Duty and Stamp Duty Reserve Tax Deep In The Money Options (DITMOs)
- Shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will now be charged the 1.5% higher rate of stamp duty based on either their market value or the option strike price, whichever is higher.
- This will prevent avoidance using DITMOs, which are options with a strike price significantly below (for call options) or above (for put options) market value.
- Share transfers made other than to a clearance service or depositary receipt system as a result of exercising an option will be unaffected.
- The change will apply to options which are entered into on or after 25 November 2015 and exercised on or after Budget 2016.