TaxCorporate TaxDisclosure plan has hallmark of success

Disclosure plan has hallmark of success

The taxman’s moves to rein in the promotion of tax avoidance schemes through the disclosure regime is working so well that the profession acknowledges that it is acting more cautiously than ever before

The latest figures from HM Revenue & Customs on the number of disclosures
made on direct tax show that 346 disclosures were made between 1 April 2006 and
31 March 2007.

This is a significant reduction on earlier periods, indicating that fewer
schemes are being designed. The previous year saw 607 disclosures and 503 were
made in 2004/2005.

Advisers said HMRC would be pleased about the way the scheme is working, even
though the taxman has previously highlighted a small number of rogue firms
attempting to ignore the regime.

‘We’re settling into a steady state. There won’t be huge numbers to give the
postman the need for overtime,’ said PricewaterhouseCoopers tax partner John
Whiting.

Grant Thornton’s head of UK tax Francesca Lagerberg said the scheme had been
‘tightened’, and that there was a trend of caution among advisers.

‘With the new regime it takes people time to get used to it,’ she said.But
although the scheme has settled down, there has been a spike over the past six
months on the disclosure of ‘hallmark’ schemes.

A revision of the disclosure rules from 1 August 2006 widened the scope of
the regime to include the whole of income tax, corporation tax and capital gains
tax.

‘Hallmark’ schemes then required disclosure, defined by HMRC as schemes
associated with a hallmark of tax avoidance designated in the relevant
legislation.

Advisers posted 125 disclosures in the past eight months to 31 March 2007
under the revision, compared with 108 disclosures across the previous ten
months.
Whiting said there were two main reasons for the recent spike.

Advisers knew that HMRC was lining up a revision of the regime, and tax
professionals were also inundated with two complex Finance acts during 2005 and
2006.

‘Advisers have got the hang of the hallmarks. There was some holding back due
to the Finance Act and advisers now understand the wider scope of the regime.
Lots of scheme dreaming up has stopped,’ Whiting said.

In the 2007 finance bill the government said it would introduce legislation
to stop non-compliance with the disclosure regime through tougher powers. These
will include the ability to compel firms to provide information via an
application to the special commissioners.

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