AS not inspiring on “Avoidance”

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An advisory to contractors whose tax arrangements are less straightforward than simple PAYE or PSC has described Philip Hammond’s Autumn Statement (AS) 2016 as “a bit of a yawn.”

Chris Leslie of Tax Networks Ltd made the remark before saying the AS by Mr Hammond, who was previously mocked as a risk-averse accountant, holds just two points of interest for such contractors.

The first is a new two-pronged attack on the hidden economy with further details due at Budget 2017, and the second is an incoming ‘Requirement to Correct’ a past failure to pay UK tax on offshore interests.

As the detail on the latter proposal (‘RTC’ for short) is not scant, the weight of the small print must be what Mr Leslie finds fatiguing. A big omission in the AS won’t have boosted his interest level.

“Missing from the speech and missing from the several hundred pages of detail, is any direct mention of the proposed 2019 tax charge,” says another advisory WTT Consulting, referring to an existing plan to tax disguised remuneration scheme users.

“In a move designed to learn more about schemes holding funds offshore via trusts, taxpayers will be obliged to disclose details. This might be seen as preparation for the 2019 tax charge although more likely is a simple question in the tax return for that year.”

‘Foolish’

The Autumn Statement also adds nothing new to a plan to impose a tax penalty on the ‘enablers’ of tax avoidance schemes — a move that could adversely impact the availability of IR35 advice from April.

But the statement does confirm that the penalty will go ahead, as will a new plan to legislate to extend HMRC’s data-gathering powers to money service businesses, so the department can identify those in the hidden economy.

‘Increase in admin burden’

The second prong of the attack will see the government consider making access to licences or services for business conditional on them being registered for tax; plus, stronger sanctions for hidden economy participators.

“The requirement to register with HMRC may increase the administrative burden for compliant business start-ups that need access to the same licences and services,” warns BDO.

“Money service businesses will also feel the impact of complying with requests for data from HMRC.”

The accountancy firm adds that alongside RTC, which is a new statutory obligation for taxpayers affording them until September 2018 to disclose or rectify their tax position, is a separate requirement to register offshore structures.

‘Deal with HMRC now’

To put this second requirement in place, the government will consult on a new legal obligation for the intermediaries that arrange complex structures for clients holding money offshore to notify HMRC of both the structures — and the related client lists.

“On offshore-related tax evasion, the [chancellor’s] message to those with offshore interests was clear — deal with any past problems now and ensure you are tax compliant in the future,” says Moore Stephens LLP.

The chartered tax adviser also said: “Measures announced in the 2016 Budget to tackle the use of disguised remuneration schemes by companies will be extended to the self-employed.

“This includes a retrospective tax in 2019 on loans related to such schemes. Tax relief on employer contributions to new schemes will be denied unless taxes are paid within a specified period. HMRC will also develop its ability to identify emerging insolvency risks, through the use of outside analytical expertise.”

AS 2016’s avoidance numbers

According to AS 2016, the combined result of the new anti-avoidance measures and taking cases forward for litigation should raise more than £450million by 2021-22.

This windfall for the exchequer is in addition to £130billion in extra tax revenue raised since 2010, thanks to existing measures against tax avoidance, evasion and non-compliance.

Further revenue will also come from new legislation that contractors will likely welcome, as it is intended to provide HMRC “customers” with “earlier certainty” on individual matters arising in “complex” tax enquiries.

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