Pre-Budget report cranks up the pressure on disclosure regimes

Brown shut down six corporate tax avoidance schemes, introduced a targeted
anti-avoidance rule for capital losses and shut down avoidance plans for stamp
duty land tax. The chancellor also closed a planning scheme used to avoid tax
charged to controlled foreign companies.

Yet the Treasury didn’t seem to be satisfied with the anti-avoidance
windfall, and also used the PBR to announce that it was planning to strengthen
its disclosure regime powers further.

In the PBR the government announced that it would publish a consultation
document later this month on a ‘new power’ that would provide it with further
investigative muscle.

The state is planning to obtain the new power so that it can ‘investigate a
scheme where there are reasonable grounds to believe that a promoter has failed
to comply with its statutory disclosure obligations’.

Francesca Lagerberg, tax partner at Grant Thornton, said that although the
disclosure regime had successfully closed down a number of tax planning schemes,
the taxman obviously felt that the regime was still missing certain schemes that
it felt it should be picking up.

‘It would appear that some individuals have been taking strong legal advice
that they do not need to disclose certain schemes under the disclosure regime,
and the authorities are introducing tougher measures to catch these schemes,’
Lagerberg said.

Advisers believe the possible measures the government could implement include
additional search and investigative powers, or new legislation targeted at
specific areas of tax planning.

‘The government probably feels that it is still a few steps behind on tax
avoidance when it wants to be one step ahead,’ Lagerberg said.

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