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Over recent years there has been a continued focus by Government
and HMRC on combatting artificial tax avoidance and filling in the
'gap' in expected tax revenues. In 2004, legislation was
introduced requiring promoters of tax avoidance schemes to notify
HMRC of any new arrangements which has enabled HMRC to take early
counter-action.
During this time the tax courts have found new ways to interpret
the legislation in the way 'that Government intended' or
rather would have intended if it had realised that taxpayers would
exploit a loophole.
In addition, HMRC has started to work in a smarter manner by
marshalling its human and technological resources to find funds
hidden in foreign bank accounts, seek out traders evading tax on
their business profits and to investigate the fine details of
complex schemes designed to mitigate tax, such as film finance
schemes.
There is a clear distinction between tax evasion, which is
illegal, and planning so as to avoid paying more tax than is
required. Old tax case law had established that taxpayers are
entitled to take action to minimise their contributions to the
state and, in an often quoted 1929 judgement, Lord Clyde said the
taxpayer was "entitled to be astute to prevent, so far as he
honestly can, the depletion of his means by the Inland
Revenue".
Over recent months the morality of both contrived and standard
planning has come under scrutiny in the media, with the inference
that anyone who pays less than the potential maximum is failing to
do their bit for society. This has to perhaps be taken into account
in tax planning as well as the technical basis for any tax
computation.
So where do we go to from here?
On the one hand George Osborne said in the 2012 Budget that he
regards tax evasion and aggressive tax avoidance as 'morally
repugnant' and announced that the war against contrived
avoidance will step up a gear next year with the introduction of
the general anti-abuse rule (GAAR). In addition, new SDLT charges
on expensive properties purchased by offshore companies have been
introduced and a consultation is due shortly on the prospect of
restricting tax reliefs.
On the other hand Government continues to offer tax advantages
to selected investments like ISAs, EISs and VCTs and it gives
special reliefs for worthy causes like R&D and business
property renovation etc. There has also been much talk of giving
support through the tax system to smaller businesses. Acceptable
planning opportunities remain for the well advised client.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Ian Stewart, Chief Economist At Deloitte, On Budget 2013
