Tax abuse dying down

So it seems worth asking whether HMRC has got anywhere with its campaign in
the past 12 months.

It has to be said that almost immediately after Harnett made his pledge, HMRC
seemed to run out of steam in its crackdown on avoidance.

After a summer that saw the Dextra and Debenhams legal rulings hand the
taxman new powers, just a short while later the tax authorities appeared to give
in over the historic issues surrounding City bonuses.

Tax advisers will remember the story. After HMRC declared its determination
to accept only 100p in the pound on all national insurance disputes, it emerged
that the taxman was going to get the national insurance from tax avoiders – but
let them skip the income tax charges. So much for the new, tough stance.

Since then, the judgement in the Halifax case has given HMRC new ammunition
to introduce an abuse of rights principle. But the Cadbury Schweppes ruling on
controlled foreign companies has allowed corporations to claim moral authority
for offshore tax arrangements.

Of course, the real issue here is the abusive stuff – the schemes that allow
the likes of Phillipa D’Arcy, the well-known City headhunter, to write off a
large amount of income tax through tax loss schemes that do not correspond to
any real economic loss.

In the past few years, the disclosure scheme has gone a long way to stamping
out abuses. And my view is that we’ve also seen a change of attitude, even in
the past 12 months.

Now that’s something to be welcomed, isn’t it?

Alex Hawkes is news editor of Accountancy Age

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