The clock has been turned backwards by HM Revenue & Customs with its latest clampdown on alleged corporation tax avoidance, which is set to rake in £1bn retrospectively and £1bn a year from 2011.
The taxman has scored a number of key successes this year in its corporate
tax crackdown efforts, but its latest victory has raised the stakes with
retrospective application of a loophole closure linked to companies making
This particular scheme is related to manufactured payments received by companies involved in sale and repurchase, or “repo” transactions.
It comes after a recent High Court ruling that retrospective legislation is not a breach of human rights.
Tax advisers from both the accounting and legal professions warn that it opens the door for a broader strategy of backdating tax rules when HMRC sees fit.
Such a strategy could destabilise the certainty of a company’s tax position, which in turn could dent confidence in the UK as a place to set up a business.
KPMG said in a tax briefing: “First, a tax system which is prepared to rewrite history by such retroactive legislation may be less attractive to potential investors who seek certainty of their tax position and thus may damage UK competitiveness.
“Second, it is not clear whether the government has changed its view on when it will be prepared to use such retroactive legislation.”
In the rare occasions when a tax has been applied retrospectively the taxman
has previously warned it was looking at that course of action. The latest
instance appears to be a hardening of its stance, according to Caspar Fox,
partner at law firm Eversheds.
“Previous warning has not been given here, and so closing this tax loophole retrospectively seems to be another sign of HMRC’s increasingly aggressive attitude towards perceived tax avoidance.”
But the taxman is unmoved, as it looks to close opportunities for plcs to
take advantage of special dividend payments, which commentators say is
unsurprising as companies have been pumping money into such vehicles in the
run-up to introduction of the 50% income tax rate in April. HMRC will be eager
to know the dividends are not disguising
The latest move doesn’t signal a policy change, said an HMRC source, but it will use this strategy where it sees fit – opening up the possibility for similar tax backdating in the future.
An HMRC spokesman said: “HMRC has always had a responsibility, and will
continue to, counter any scheme that is being used by individuals and businesses
to avoid their
“Where such schemes come to light, they will be closed down in the most appropriate and effective way.”
IN OUR VIEW
HMRC’s move seems to go against the principle that the taxpayer is taxed on the wording of the legislation in place at the time of their actions. Therefore jittery plcs will be even more nervous about remaining in the UK and the measure is another in a long line of tax rules that have raised the hackles of UK business – where will it end?
It will end when the state has squandered the last pound of wealth created by the private sector...
Posted by: Winston Smith, 18 Feb 2010 | 00:00
If you have something we want we will take it ! Seems to be the attitude of this government. If democracy does still exist we need to start campaigning for something different !
Posted by: Spike, 18 Feb 2010 | 00:00
with the recebt ruling on machine bingo where a player has to be certain of the tax status of their actions?
Rank won their case on the basis that a player was no able to guarantee that teh game they were playing was either exempt or standard rated until the game was over.
Surely this is the same thing a taxpayer wont knwo the true tax status of their actions until, presumably the possibility of change is time barred by statute?
Posted by: agent of the state, 18 Feb 2010 | 00:00
The balance is shifting - at last HMRC bares it's teeth to shut down the tax avoidance industry. The accounts squeal about business certainty. But where is the commercial rational for the tax schemes they manufacture.
Who is really distorting the economy?
Posted by: Max B Gold, 22 Feb 2010 | 00:00
This government has already squandered the last £ generated by the private sector, plus everything that could be generated for the next 20 years at least. The pound is heading for worthless. Maybe they can con the electorate, but not the markets - or corporates who are smart enough to be exiting the UK just as fast as they can. When will the electorate wake up? At £1000 = 1 Euro? Or maybe when a loaf of bread costs £10,000? What a bunch of idiotic wasters.
Posted by: Wannabe Expat, 26 Feb 2010 | 00:00
If an overseas tax adviser were to advise their client to use the UK as their gateway to Europe would this constitute negligence on the basis that it is common knowledge that even established UK companies have had enough and are relocating for tax reasons?
Posted by: Martin, 26 Feb 2010 | 00:00
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