Philip Hammond MP, the Chancellor of the Exchequer, has delivered the last (for the time being) Spring Budget. The Budget Report 2017 boasts that:
“In this Parliament, the government has announced it will legislate for over 35 measures to tackle avoidance, evasion and aggressive tax planning … Since 2010, HMRC has secured around £140 billion in additional tax revenue through tackling avoidance, evasion and non-compliance, and the UK’s tax gap remains one of the lowest in the world”.
As we have noted previously (see for example here), the Government are determined to make the UK a hostile environment for those that evade their tax obligations. In rhetorical terms at least, Budget 2017 continues this trend. What however of the technical changes announced in the Budget – do they mirror the Chancellor’s rhetoric?
For criminal tax practitioners and other professional advisers, the following technical measures and announcements are likely to be of interest. It should however be noted that many of these have been announced before.
1. Offshore evasion: requirement to correct previous non-compliance
As announced at Budget 2016, the Government will introduce in Finance Bill 2017 a ‘requirement to correct’ in relation to offshore tax interests. HMT expect this to come into force when the Finance Bill 2017 receives Royal Assent and will apply to all taxpayers with offshore interests who have not complied with their UK tax obligations as at 5 April 2017.
HMT have also said that the relevant draft legislation “will be revised to ensure the reasonable excuse provision doesn’t apply where advice is received from an adviser who is not independent”.
2. VAT: penalty changes in fraud cases
As announced at Autumn Statement 2016, the Government will legislate in Finance Bill 2017 to introduce a penalty for participating in VAT fraud.
Following the Government’s consultation on the draft legislation, some minor changes have been made “to improve the clarity of the measure and also to limit the naming of a company officer to instances where the amount of tax due exceeds £25,000”.
HMT say that the new penalty will take effect once the Finance Bill receives Royal Assent.
3. Disclosure of indirect tax avoidance schemes
As announced at Autumn Statement 2016, the Government will legislate in Finance Bill 2017 to strengthen the regime for the Disclosure of Indirect Tax Avoidance. HMT say that “[p]rovision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the legislation will be extended to include all indirect taxes, including the Soft Drinks Industry Levy.
HMT say that these measures will come into effect on 1 September 2017.
4. Promoters of Tax Avoidance Schemes
Announced in the Spring Budget for the first time in detail, the government will legislate in Finance Bill 2017 to make sure that “promoters of tax avoidance schemes can’t circumvent the Promoters of Tax Avoidance Schemes (POTAS) regime by re-organising their business by either sharing control of a promoting business or putting a person or persons between themselves and the promoting business”.
HMT say that the changes will take effect from 8 March 2017.
5. Strengthening tax avoidance sanctions and deterrents
As announced at Autumn Statement 2016, the Government will legislate to introduce a new penalty on those individuals or entities who enable the use of tax avoidance arrangements which HMRC later defeats (‘enablers’). According to HMT:
“This new regime reflects an extensive consultation and input from stakeholders. The legislation will also provide clarification as to what constitutes ‘reasonable care’ in relation to the application of the penalties charged on taxpayers following the defeat of tax avoidance”.
The changes relating to reasonable care come into effect at Royal Assent and apply to inaccuracies in documents relating to tax periods which begin on or after 6 April 2017.
Whilst many of the legislative announcements in the Spring Budget were already in the pipeline, the Chancellor was keen to re-emphasise the Government’s commitment to clamping down on tax avoidance and evasion. The targeting of “off-shore evaders” and “professional enablers” (those who promote and run aggressive tax avoidance schemes) remains central to the Government’s and HMRCs strategy. 2017 will see the implementation of many of the new and wide ranging legislative powers formulated over recent Budgets – It will be interesting to see whether the results match the rhetoric.