PBR: Tax avoidance disclosures begin to bite
Gordon Brown struck a blow against tax avoidance in the pre-Budget report, with the first major deployment of intelligence forced out of accountants by new disclosure rules.
Experts concluded that the Revenue’s Avoidance Intelligence Unit, created in this year’s Budget, had started to show its teeth.
The chancellor sank them into a number of financial avoidance schemes that came to light as a result of the new disclosure rules.
These included block schemes used by companies to avoid tax on debt securities by manipulating ‘repo’ and stock lending arrangements; and a scheme to avoid income tax involving so-called stripped corporate bonds.
He also pulled the plug on the use of big city bonuses and other employee rewards to shirk tax and National Insurance.
Bill Dodwell, a tax partner at Deloitte, said the chancellor had also used his eighth PBR to stamp down on avoidance schemes he had been eyeing even before the first disclosures began in September.
For example, he said the Treasury had long known of schemes relating to controlled foreign company (CFC) rules, intendng to prevent companies from avoiding tax by the artificial diversion of profits from the UK.
Brown clearly saw international tax planning as a key area of abuse, also targeting exploitation of Double Taxation Relief.
Asked if the clamp down was a ‘fair cop’, Dodwell said Brown had tackled companies side-stepping rules designed to prevent them from keeping lower taxed income offshore.
But he added that companies might argue the changes would make them less competitive at a time when George Bush was relaxing tax rules for US multinationals.