TaxPersonal TaxTreasury increases tax avoidance revenue estimate by 50%

Treasury increases tax avoidance revenue estimate by 50%

Government estimates around the revenue to be collected through its disguised remuneration policy increased from £500m to £750m in three months

THE GOVERNMENT HAS revised up its estimate for the revenue generated by a tax avoidance measure from £500m to £750m a year without new data becoming available, Accountancy Age has discovered.

Its policy to tackle disguised remuneration – such as Employee Benefit Trusts (EBTs) and Employer Funded Retirement Benefit Scheme (EFRBS), which attempt to avoid paying PAYE – was expected to bring in £750m a year according to the Budget documents. The Treasury said this figure was based on a 2008/2009 HM Revenue & Customs estimate that it was losing £1.1bn a year through these schemes.

The Budget document calculated that this was likely to rise by 5% a year and behaviour changes after the legislation is enacted would reduce this figure by 50% to 60%, ending up with the figure of £760m a year by 2015/2016.

However, the consultation for the Finance Bill, which was published in December 2010, calculated that the policy was worth £500m.

A Treasury spokeswoman said the December figures were “initial estimates”.
“These have since been refined, based on improved information and intelligence on the usage and take-up of EBTs and EFRBS,” she added.

She said that there have been minor adjustments to take into account changes to the economic forecast and assumptions around the behavioural impacts.

Jayne Vaughn, employment tax partner at KPMG, said there was “still a lot of uncertainty around this”.

“They do not know how behaviour is going to change,” she said.

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