Budget 09: Government to increase tax avoidance fine

Alistair Darling, has announced plans to strengthen rules requiring the disclosure of tax avoidance schemes to HM Revenue & Customs.

In his Budget speech earlier today the chancellor said the government would 'revise the penalty regime to introduce tougher sanctions for the non compliant', and begin discussions about how the taxman can spot tax avoidance schemes at an earlier stage.

Under current disclosure rules, which were introduced in 2004, the fine for non disclosure is £5,000.

The 'Disclosure of Tax Avoidance Schemes' rules include income tax and VAT to stamp duty land tax and capital gains.

'HMRC will begin discussions with interested parties with a view to extending the ‘hallmarks’ used to identify avoidance schemes, to ensure they continue to bear down on avoidance, and revising the penalty regime to introduce tougher sanctions for the non compliant,' HMRC said in a statement.

'Hallmarks' include keeping the tax scheme arrangements confidential from a competitor and HMRC, and when the promoter of the tax scheme takes a commission based on the amount of tax they save their customer.

'This is fine tuning current rules,' said Nick Parker, regional director of tax at Tenon, the top 10 accounting firm. 'The current rules have been very successful because they are essentially an early warning system to the Inland Revenue.'

Taxpayers or companies using avoidance schemes are given a reference number which has to be disclosed on their tax returns. This helps HMRC monitor how widely certain types of scheme are being used.