‘Getting Tough On Tax Avoidance Schemes’

The gloves are off and avoidance schemes are clearly under attack.

The government has introduced a General Anti-Abuse Rule (GAAR), aimed at deterring and preventing artificial and abusive tax avoidance schemes. UK tax law has in the past been specifically targeted rather than purposive: in tackling the exploitation of loopholes in the law, governments have legislated against individual avoidance schemes as and when these have come to light. Often the response to this legislation has been the creation of new schemes to circumvent the law, which in turn has seen further legislative action – an ‘arms race’ between the revenue authorities and Parliamentary counsel on one side, and on the other, taxpayers and their professionals. Over the past twenty years some commentators have suggested having legislation to counter tax avoidance in general: by providing certainty for both sides as to the tax consequences of any transaction, a ‘General Anti-Avoidance Rule’ might dissuade  most efforts to avoid tax.

They  will also introduce new measures to deal with tax advisers who sell in the HMRC’s words “contrived and aggressive tax avoidance schemes”. The government has announced it will consult on proposals to introduce significant new information disclosure and penalty powers, to make it more difficult for the promoters of “abusive schemes”( says the HMRC)  to continue to market them in the future.

They are using settlement opportunities to encourage users of avoidance schemes to agree their tax position with them, and investing in additional resource to accelerate litigation for those who do not settle.

They are making better use of anti-avoidance communications to influence the behavior of taxpayers and promoters of avoidance schemes. They are also improving the quality of information available on avoidance to help taxpayers realise the potential downsides and risks.

HM Revenue & Customs could seize hundreds of millions from up to 65,000 individuals under plans to crack down on tax avoidance schemes.

Exchequer secretary to the Treasury David Gauke says: “We are sending a clear message: that if you try to avoid paying the tax you owe, we will pursue it. The vast majority of people work hard and pay their fair share in tax. It is not right that a small minority think they can avoid doing the same.”

The language of the government and HMRC is emotive with the use of words such as ‘abusive’ ‘aggressive’ ‘contrived’ ‘fair’ and as part of the war on tax avoidance the government is seeking to change the electorate’s perception of the morality of tax avoidance and avoidance schemes will suffer if not already widespread moral opprobrium.