Government tax avoidance clampdown

David Gauke, Exchequer Secretary to the Treasury, has announced a number of changes to legislation to tackle tax avoidance. Some of these changes will take immediate effect.

Together, these announcements will protect forecast revenues estimated at up to £5billion over the next 4 years, and are expected to raise over £2billion in additional revenue during the course of this parliament.

These measures take the necessary steps to protect the Exchequer, and maintain fairness for the taxpayer, whilst providing certainty for businesses whose investment will encourage the re-balancing of the economy and job creation.

Two measures with immediate effect will tackle tax avoidance by:

preventing groups of companies using intra-group loans or derivatives, to reduce the group's tax bill, and,

addressing schemes where a company does not fully recognise certain amounts in its accounts involving loans and derivatives

Three measures with further detail to be set out shortly, will tackle tax avoidance through:

addressing the practice of disguised remuneration,

stopping investment companies retrospectively changing the currency they prepare their accounts in for tax purposes, and,

tackling businesses who artificially split the supply of services to reduce VAT.

In addition to these measures, the Exchequer Secretary has asked Graham Aaronson QC to lead a study into a General Anti Avoidance Rule (GAAR). This study will consider whether a GAAR could deter and counter tax avoidance, whilst providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for businesses and HMRC. The Government is committed to predictability and stability for the UK tax system, and would not introduce a GAAR without further formal public consultation

As set out in the June Budget, the Government is committed to tackling tax avoidance, and has been clear that it will build in sustainable defences to address long-standing avoidance risks.

The Government's response to significant avoidance risks will be balanced with its commitment to improving predictability and stability in the tax system. The Government will publish on 9 December a draft Protocol that will set out the circumstances in which it will consider changing legislation with immediate effect.

For more information, visit hmrc.gov.uk.