Treasury chief says errant advisers will receive "no quarter"

A SENIOR TREASURY figure has warned errant taxpayers and their professional advisers that the government will severely punish those who evade tax, but also those conducting aggressive tax planning.

David Gauke (left), the exchequer secretary, said that the government knew the difference between legitimate tax planning and evasion, but would also come down hard on advisers bending the rules too far for their clients through tax avoidance.

In terms of evasion, “no quarter” would be given to those who break the law, Gauke warned the assembled guests at the annual Hardman lecture, hosted by the ICAEW.

“But there’s also times when it’s perfectly clear what the law intends – where reliefs and exemptions are then used in a highly artificial way,” Gauke said.

“In these instances, people use their resources – and their talents – to twist the law and create results that everyone knows are simply too good to be true.”

On the operational side, Gauke said there had been some tough decisions to be made regarding HM Revenue & Customs.

The dilemma facing the government rests on the fact the taxman is having to do more with less after not being spared from the spending cuts.

“Even before we came to power, it was always clear that departments would have to reduce their budgets and that HMRC could not be immune from these pressures,” Gauke said.

He told the audience of tax experts that he knew some harboured doubts that HMRC could make 15% of cost savings, while improving services and delivering on a £900m reinvestment.

But Gauke promised that this could be achieved.

“Yes, this will be hard – but I assure you, our plan is deliverable.”

In terms of supporting businesses and convincing them not to shift their tax base overseas, Gauke promised that the UK would have the lowest corporate tax rate rate of any major Western economy when the rate went down to 24% by 2014-2015.

“This will be the lowest rate of any major Western economy, one of the most competitive rates in the G20, and the lowest rate this country has ever seen,” Gauke said.
The Exchequer secretary also reinforced the UK’s commitment to resolving long-running issues on controlled foreign companies, which has seen some of the UK’s biggest multinationals clash with the government.

“For years businesses have complained about the tax treatment of overseas subsidiaries,” Gauke said.

“Saying that our rules on foreign profits are archaic – dating back to the early 1980s – and bear little or no resemblance to the modern business environment.

“It’s our intention to adopt a more territorial approach to taxation, one that properly reflects the times we live in and how businesses now operate,” Gauke added.