THE INTRODUCTION of the Diverted Profit Tax – dubbed by some as the ‘Google Tax’ – has been confirmed by the chancellor in the Budget as the government seeks to glean as much as £5bn from its clampdown on tax avoidance.
The rule will take effect from 1 April, despite calls from some quarters for a deferral and a consultation period.
The 25% levy will be applied to multinational businesses seeking to shift profits made in the UK offshore. Many advisers believe the threat is more notional, with very few multinationals likely to admit they need to self-assess for an issue with the diverted profits tax. Instead, simply altering their tax practices, registering their branch in the UK and paying 20% instead.
“Very little time has been made available for multinationals that may be affected by the new tax to analyse their position and, if appropriate, restructure accordingly,” said Alvarez & Marsal Taxand managing director Kevin Hindley.
Alongside the move, businesses also face anti-avoidance measures on loss refreshment schemes, a new penalty regime based on amount of tax payable under the GAAR and a commitment from HMRC to increase the number of accelerated payment notices to companies, whereby disputed tax is paid to HMRC upfront prior to litigation.
On the personal front, serial avoiders were targeted with “special” reporting requirements and a surcharge for any inaccurate tax returns. The government will also seek to deny serial avoiders access to tax reliefs where they have a track record of abusing reliefs. The name-and-shame regime will be further extended, according to the Budget document.
HM Revenue & Customs will extend is power to issue conduct notices to a broader range of people, to include those who not only promote tax avoidance schemes but advise on and distribute them.
The government also pledged to legislate so that the three-year limit on conduct notices will apply from the point a fault is identified, not just from when it took place.
BKL Tax partner Geraint Jones said: “How far-reaching the legislation to restrict reliefs to serial abusers will be remains to be seen. The wording in the Budget documentation is very loose, and it is not clear whether the abuse of one relief could result in restriction of others.”
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