The vast majority of people and businesses pay their fair share of tax. However, the Government are fully committed to clamping down on those who avoid or evade paying their tax. The Government are today announcing a series of actions that are being taken to tackle tax avoidance and evasion through domestic and international action: new investment in HM Revenue and Customs (HMRC), further developments on progress internationally and more powers that will underpin the Government’s commitment to tackle avoidance and evasion. These announcements come ahead of the Chancellor’s autumn statement on Wednesday 5 December.
New funding for HMRC
The Government are already investing over £900 million in HMRC to secure an additional £7 billion of revenue a year, taking HMRC’s total compliance revenues to £20 billion in 2014-15. A further £77 million will be provided to HMRC in this spending review period to further expand its anti-avoidance and evasion activity focused on offshore evasion and avoidance by wealthy individuals and by multinationals. This investment will secure a further £2 billion in 2014-15, £22 billion in total. This is 70% higher than in 2010-11.
As a result of this new funding, HMRC will:
Accelerate work to identify and challenge multinationals’ transfer pricing arrangements and further strengthen its risk assessment capability across the large business sector. That 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.
Expand its 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.
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 accelerating litigation against those that fail to take up the settlement opportunity.
Create a new “centre of excellence” to develop a comprehensive approach to 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. A comprehensive strategy on offshore tax evasion will be published in spring 2013.
Improve its risking technology, including increased use of third-party data. HMRC have today published “Closing in on tax evasion: HMRC’s approach” which sets out how HMRC are using technology to tackle those who break the law through tax evasion.
Agreement with US
A groundbreaking agreement with the US—the UK/US agreement to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA)—will significantly increase the amount of information automatically exchanged between the two countries. The agreement sets a new standard in international tax transparency and will further enhance HMRC’s ability to tackle offshore evasion. The Government will look to conclude similar agreements with other jurisdictions.
Action to tackle the promoters of tax avoidance schemes
Over the summer the Government published a consultation document, “Lifting the Lid on Tax Avoidance Schemes”, on a wide range of proposals to increase information about tax avoidance.
The consultation involved constructive engagement with a large number of representative bodies and businesses. It also demonstrated very strong support from mainstream tax advisers for new measures to crack down on those who market tax avoidance schemes. In response, the Government will bring forward proposals to introduce significant new information disclosure and penalty powers that will go further than existing, general rules on the marketing of financial products and consumer protection. The new powers will allow HMRC to better target the marketing of tax avoidance schemes that pose a high risk to users and the Exchequer.
The Government will also strengthen the existing disclosure of tax avoidance schemes regime through legislation in 2013 that will extend the range of information that must be disclosed to HMRC and impose additional sanctions for non-compliance.
The introduction of a general anti-abuse rule (GAAR)
In December 2010, the Government asked Graham Aaronson QC to lead a study that would consider whether a 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. The GAAR the Government are now introducing will provide a significant new deterrent to abusive avoidance schemes and strengthen HMRC’s means of tackling them where they persist. Guidance and draft legislation on the GAAR will be published in December.