PBR05: Anti-avoidance raises £1bn

The chancellor has announced a range of anti-avoidance measures that will
raise more than £1bn by 2008/9.

Chief amongst them is the change to the 0% rate on incorporations, which the
Treasury thought many small companies were abusing, raising £530m.

Capital loss provisions, which prevent companies buying other companies with
capital losses unless there is a ‘commercial purpose’ to the transaction, will
raise £300m, the next largest revenue raising measure, by 2007/8.

A crackdown on corporate intangible assets avoidance will raise £120m by
2007/8, whilst HMRC has disclosed that the effect of insurance company
provisions will be £155m this year, and £85m by 2007/8.

Perhaps the most interesting measure, however, is the change to the
disclosure rules. HMRC has announced discussions with stakeholders over the
disclosure regime, in an apparent attempt to ensure that it is watertight.

The rules will hammer advisers, already seeing their business decline in the
wake of earlier announcements: ‘All of the income from tax planning has gone
belly up since the chancellor started his disclosure rules. He has closed many
things down and now he is going to tighten the rules again,’ said Alastair
Kendrick, of Wilder Coe.

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