Clarke blasts tax advisers

Chancellor Kenneth Clarke rounded on ‘ingenious’ accountants in a blistering attack on the tax avoidance industry in Tuesday’s Budget.

Clarke signalled a wide-ranging crackdown on loopholes which will send tax advisers back to the drawing board in search of new avoidance measures.

‘Spend-to-Save’ is an ambitious #800m initiative designed to recoup at least #6.7bn over the next three years. It involves the transfer of up to 3,100 revenue gathering staff to tax investigations.

Leading accountants reacted with fury to the Chancellor’s broadside.

Clark Whitehill tax partner Mark Lee said: ‘It’s disgraceful how they blur the distinction between tax evasion and legitimate tax avoidance.

Any ingenious tax accountant is merely helping clients legally minimise exposure to tax.’

Price Waterhouse’s head of personal tax, John Whiting, added: ‘Does the Chancellor know what he is talking about? He’s set his sights on my profession and the way I make my living.’

Ernst & Young’s national tax partner, Douglas Fairbairn, said: ‘The raft of measures included in the Budget represents the biggest attack by Government on perceived tax avoidance.

‘Mr Clarke made much in his speech of companies supposedly not paying their fair share of tax, but legitimate tax planning will be damaged by these proposals.’

Others said the Government had resigned itself to election defeat. One Big Six tax partner said: ‘The reallocation of Revenue staff into investigations is a poison pill.

‘The Government has created a monster called self-assessment and will leave Labour to pick up the pieces while at the same time putting 2,000 heavies on the street to make the system really unpopular.’

Far from being the safe, pre-election Budget predicted, Clarke opted for several controversial measures.

VAT ‘option to tax’ changes threatens much construction work, according to E&Y’s Martin Scammell.

The Chancellor also backed down in the face of pressure from the accountancy profession for equal time limits under the new three-year rule for VAT repayments.

He ditched plans to allow Customs & Excise six years to claim underpaid tax, while businesses were only entitled to three years for repayment of overpaid VAT.

On top of a 1p cut in the basic rate of income tax and increased personal allowances, Clarke promised to abolish the ‘temporary’ tax relief on profit-related pay schemes.

He said: ‘Good managers don’t need tax relief to link pay to performance.’

But the Institute of Directors disagreed: ‘We accept PRP has done its job, but we remain committed to the principle that employees should be made aware of the importance of their employers’ performance for their own continuing security and prosperity.’

E&Y’s employer services partner, Alan Olivey, said: ‘We don’t believe that PRP will survive without the tax relief. Lower-paid employees just won’t put their pay at risk without the cushion of tax relief.

‘We would have preferred sensible reform.’