Death knell sounds for avoidance

Tax avoidance will be stamped out by 2008, HM Revenue & Customs claimed
this week.

In an interview with Accountancy Age, Dave
Hartnett, director-general of HMRC, said it was the department’s goal that
within three years ‘we will have made tax avoidance not worthwhile’. It is
understood to be the first time the government has put an effective end-date on
its anti-avoidance programme.

Hartnett also confirmed that the department plans to push ahead with its
assault on Debenhams-style schemes. It will pursue the retailers that used card
handling companies to avoid VAT for an extra £100m on top of the estimated £550m
they avoided.

‘We don’t want avoidance to pay and if it actually costs more, that’s awfully
sad, but that’s the consequence of playing with fire,’ Harnett said.

He also revealed a frustration with advisers, who argue that July’s Dextra
decision on employee benefit trusts, which will net HMRC £500m, does not apply
to all EBT avoidance plans.

‘[Dextra] may not be an easy decision for the tax planning industry. If
people won’t pay or want to start a new argument then we will oblige them. This
is a decision of the House of Lords of wide application.’

The two cases are viewed by HMRC as key victories in its battle on tax
avoidance, which it will step up.

From now on, HMRC negotiators will no longer accept settlements on national
insurance disputes of less than 100p in the pound, he revealed.

Previously, government tax lawyers had accepted smaller settlements,
potentially incentivising avoidance.

Hartnett also drew attention to a forthcoming legal judgment in Europe, the
so-called Halifax case. If it goes HMRC’s way, Hartnett said the principle, that
tax planning is illegal if it is undertaken to avoid tax and not for any
economic benefit, was likely to be used across the range of taxes.

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