EC ruling could "significantly" hit UK tax take

TAX TAKE WILL be "significantly" hit by a European Commission request to the UK to amend anti-avoidance measures.

The commission announced yesterday that legislation regarding the transfer of assets abroad and the attribution of gains to non-UK resident companies were "disproportionate". It added that the measures "go beyond what is reasonably necessary" to prevent tax avoidance.

The order has serious implications for the Treasury's revenue, said David Kilshaw, chair of KPMG's private client practice. "This is a potential threat to the Exchequer for sure. We are talking a significant amount of tax," he said.

Currently, the provisions allow HM Revenue & Customs to review offshore structures and make them transparent for tax purposes. They then tax the individual who has assets in these structures at the personal tax rate.

The EC has said this is discriminatory, as the individual would not be subject to tax for the assets in a UK company - only the company's assets would be taxable.

"It is weakening one of HMRC's main lines of defence against tax evasion," Kilshaw said.

He added there was a possibility that HMRC could start taxing UK companies higher if the UK is forced to charge them the same rate as offshore companies.