Loopholes emerge in HMRC disclosure plan

Plans by HM Revenue & Customs to strengthen its disclosure regime powers
are facing a further wave of criticism after it emerged that the moves, intended
to close down gaps in the rules, themselves contain significant loopholes.

In a recent meeting, held as part of HMRC’s consultation on the changes to
the disclosure regime, it emerged that the amended rules would not apply to
offshore operators, advisers with legal professional privilege, or any tax
planning performed in-house.

The limited scope of the proposed new powers has prompted fears that firms
already making the necessary disclosures will be further burdened by red tape,
while only a minute number of non-compliant firms would be caught.

‘It is feared that the measures proposed will create an administrative burden
for compliant firms and only catch a small number of the firms that are refusing
to comply. Hopefully, this will be taken into account in the consultation,’ said
Bill Dodwell, corporate tax partner at Deloitte.

HMRC introduced the disclosure regime in order to oblige advisers to inform
authorities of any new tax schemes. Most firms have complied with the new rules,
but a small band of renegade planners have defied HMRC and refused to notify the
taxman of new schemes.

Senior HMRC figures, including director general Dave Hartnett and Chris
Tailby, head of the anti-avoidance group, have lashed out at these aggressive
firms and vowed to bring them to heel.

Speaking to Accountancy Age, Tailby said that new powers were needed
to deal with the ‘minority of promoters’ using disclosure regime ‘avoidance
techniques’.

Hartnett described the non-compliant firms as ‘spivvy boutiques’ that
specialise in ‘the kind of tax avoidance schemes others would never touch’.

The limited nature of the added powers proposed in early consultations,
however, suggest that HMRC may need to extend its disclosure powers further than
it originally planned in order to net the non-compliant minority.