IF THERE IS ONE big winner from this year’s Budget, HMRC has a significant claim, coming out of the chancellor’s almost hour-long address with an additional £1bn of departmental budget and the prospect of new ‘modern’ powers.
At face value, the powers appear to be a massive extension, and in practice will mean the taxman can recover tax directly from debtors’ bank and building society accounts, including ISAs.
A consultation document is expected shortly, but the government expects the move to generate £4bn over the next five years.
The Budget document shows the powers will focus on those owing at least £1,000 and have been “contacted multiple times” by HMRC to pay. It adds “a single aggregate of £5,000 will be left across all accounts, including ISAs, after the debt is recovered”.
“There are going to need to be safeguards in place to ensure HMRC do not withdraw incorrect or disputed amounts of tax from the taxpayers’ bank account,” said Reeves tax partner Geraint Jones. “This is likely to cause significant concern among civil liberties groups.”
Consultations, too, were launched on crackdowns on tax avoidance arrangements linked to Enterprise Investment Schemes and Venture Capital Trusts, which the government is concerned exploits reliefs in heavily de-risked, artificial vehicles.
On a corporate level, steps have been taken to prevent intra-company transfers across borders in order to prevent profit shifting.
“This measure builds on anti-avoidance measures introduced in the Autumn Statement that sought to block avoidance arrangements utilising derivative contracts to transfer UK profits outside of the UK tax net,” said Kevin Hindley, managing director at Alvarez & Marsal. “The measures announced by Osborne today broaden that scope to capture arrangements that have the same economic effect, but utilise a mechanism other than a derivative contract.”
There was also confirmation of the expected ‘accelerated payment’ or ‘pay up first’ scheme for tax avoidance structures disclosed under DOTAS. The move sees those in tax avoidance schemes compelled to pay their bills up front while HMRC conducts investigations into their arrangements. The move is designed to eliminate the tactic some employ of holding onto disputed tax, while their case is investigated and litigated, which can take years.
The ATT had previously expressed concern that the legislation was overly complex and created unnecessary complications within the practical working of the new allowances
Introduced in 2013 to encourage R&D investment, the scheme allows UK businesses to pay only 10% corporation tax on profits derived from any UK or certain EU patents
Yet, KPMG’s annual survey shows that the UK is still an attractive place to do business, despite falling in rankings in tax competitiveness and FDI appeal
Following recent issues with HMRC’s personal tax computation software, Brian Palmer of the AAT questions whether the government’s implementation timeframe for Making Tax Digital is realistic