The Government has long had an aim of making the UK a hostile environment for those that are found to have evaded or avoided their tax responsibilities. In the Autumn Statement of 2016 (apparently the last such statement of its kind), the Chancellor continues this trend with a range of announcements to tackle tax evasion and avoidance.
Perhaps the most significant announcement is the Chancellor’s confirmation that he will introduce a “new penalty for any person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC”. This announcement had been foreshadowed by the Treasury in the 2016 Budget and was the subject of a consultation earlier this year. The Treasury promise that the new regime will reflect the responses submitted as part of this consultation and that draft legislation will be published shortly.
Other announcements include:
- Confirmation that the Treasury will remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses defeated tax avoidance arrangements.
- A pledge that the government will introduce a new legal requirement to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so
- An expansion of the scope of disguised remuneration anti-avoidance provisions to tackle the non-payment of tax and national insurance by the self-employed.
- A promise to consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.
- A commitment to legislate to extend HMRC’s data-gathering powers to money service businesses in order to identify those operating in the hidden economy.
Tax practitioners are (understandably) likely to be anxious about the confirmation by the Chancellor that he will introduce a penalty for enablers of tax avoidance arrangements that are later defeated by HMRC. Given the ambiguity in much tax legislation, and thus the potential for ‘legitimate’ tax planning to become, in HMRC’s views, ‘illegitimate’, this new penalty regime could be applied very broadly. It will therefore be of great interest to see how the legislation is drafted and, equally importantly, how HMRC will police its use of this new provision. Recent experience suggests an aggressive approach is likely to be adopted.