CHANCELLOR Philip Hammond has vowed to further tighten the screw on businesses that evade, avoid or engage in non-compliance of tax – and penalise professional advisers who help them to do so.
Mr Hammond declared that the Government will raise £820 million under new enforcement measures, building on the £140 billion it is said have secured on additional tax revenue by clamping down on evasion, avoidance and non-compliance since 2010.
The latest moves are targeted at specific ways in which tax is avoided or evaded, such as loopholes that circumvent charges on exiting foreign pension schemes. Penalties will be introduced for advisers in a bid to prevent new schemes being originated.
However David Watt, director of bosses’ group the Institute of Directors (IoD) in Scotland, questioned the Treasury’s ability to make the measures work in practice.
Mr Watt said: “Further tightening of tax avoidance rules is a good idea on paper, but how many Chancellors have promised this and not been able to do it, especially since the HMRC workforce has been significantly cut?
“Furthermore, I suspect as well as increased UK effort it would need international agreement, and again, this would be hard to deliver in practice.”
John McAuslin, tax partner at accountancy firm Johnston Carmichael, said it was positive that ministers had moved to bring in more targeted measures to tackle avoidance and evasion, adding that he welcomed efforts to try and stop the creation of new avoidance vehicles at source.
It is understood that advisers found to have enabled avoidance products will face penalties equal to 100 per cent of the fees they charged, with the penalties applied all the way down the supply chain.
Mr McAuslin said HMRC had spearheaded a “complete cultural change” to avoidance in the last decade.
But Mr Watt questioned how the new penalties on enabling can be enforced, declaring that “once again this measure completely misses the point”.
Mr Watt added: “Penalising others for exploiting gaps in a complex tax system which creates loopholes is a poor substitute for real, properly thought out simplification instead.”
Mr Hammond said: “These actions have helped the UK achieve one of the lowest gaps in the world. But there is more that we can do. Mr Hammond said.
“In this Budget we set out further action to stop businesses from converting capital losses into trading losses, tackle abuse of foreign pension schemes, introduce VAT (value added tax) on roaming telecoms services outside the EU in line with international standard practice.
“And from July we will introduce a tough new financial penalty for professionals who enable a tax avoidance arrangement that is later defeated by HMRC.
“Taken together these measures will raise £820 million over the forecast period.”
Meanwhile, the business groups welcomed Chancellor’s pledge to cut corporation tax to 19 per cent from April this year and 17 per cent by 2020.
With Mr Hammond emphasising that the commitment makes the UK the most competitive tax regime in the G7 group of nations, Mr Watt said it will help as “businesses will need to be really competitive when Brexit hits”.
Mr McAuslin noted that firms will benefit from the certainty of knowing the rate of corporation tax over the next three years, adding that the reduction signals that the UK is an “attractive place to do business.”
In other business measures, Mr Hammond pledged to reduce the administrative burden around the R&D (research and development) tax credit regime.
This, he said, would make the UK “even more attractive for R&D”.
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