For compliance departments that concern themselves with tax avoidance data-gathering, here are the new measures.

For compliance departments that concern themselves with tax avoidance data-gathering, here are the new measures. Most of these - though not all - were announced yesterday by Chancellor of the Exchequer George Osbourne and are destined to become law in the upcoming Finance Bill, which has yet to be finalised.

The Finance Bill is to give Her Majesty's Revenue & Customs new powers to tackle "non-cooperative promoters of tax avoidance schemes." These powers will include the ability to issue conduct notices, breaches of which will, in the Chancellor's convoluted parlance, "trigger enhanced information powers with large financial penalties for non-compliance. In the wake of a consultative exercise that finished last month, the government will legislate to empower HMRC to tell the user of something it suspects to be a "tax avoidance scheme" that he/she/it should settle his/her/its "dispute" with the tax authority "when the claimed tax effect has been defeated in other litigation." If the taxpayer does not settle, he/she/it should pay a penalty if HMRC wins the case and should make an up-front payment of the amount in dispute whatever else happens. [The government seems to be expecting victory in all cases as it already refers to the disputed amounts as 'tax'.]


The Chancellor has just announced that this long-expected requirement to pay upfront will also apply to the disputed tax associated with any scheme that falls within the disclosure of tax avoidance scheme rules (DOTAS, which has been in place for years) and with schemes against which HMRC uses the Chancellor's general anti-abuse rule (GAAR).


The Budget has promised some improvements to DOTAS - mostly extra "avoidance scheme hallmarks" and harsher penalties for non-disclosure - for inclusion in the Finance Bill of 2015 after a consultative period.

The Government also says that it plans to consult people about changes to the Value-Added-Tax-Avoidance Disclosure Regime, although these will not appear in the upcoming bill either. The main object of the exercise here is to shift the primary responsibility for disclosure from the users to the promoters of VAT avoidance schemes.

The government is also considering more deterrence against the use of charities established for the purpose of tax avoidance, although it is vague on this point.

As announced in last year's Budget speech, the Government will amend and strengthen existing laws to ensure that offshore employment intermediaries pay the correct income tax with effect from April 2014.

The Government, in the upcoming bill, is to reinforce the Controlled Foreign Company (CFC) regime "to prevent UK base erosion caused by the transfer of intragroup interest income offshore or by moving a foreign affiliate’s bank debt into a UK company." It also proposes to widen the ambit of s363A Taxation International and Other Provisions Act (TIOPA) 2010, which at the moment assumes that offshore funds that are undertakings for collective investment in transferable securities are not resident in the UK if they are resident in another European Union country for the purposes of any tax imposed under the law of that state on income. Once the Government has consulted interested parties, the section will be amended to include alternative investment funds as of 5 December 2013.

Debt recovery: straight out of people's bank accounts

Some compliance departments might also be interested to know that the Budget's explanatory document, released online immediately after the Chancellor's speech yesterday, has announced that tax credit debt recovery rates for the highest earners in the tax credit system will be increased. It goes on to say: "The Government will modernise and strengthen HMRC’s debt collection powers to recover financial assets from the bank accounts of debtors who owe over £1,000 of tax or tax credit debts, have the financial means to pay, and have been contacted multiple times by HMRC to pay. A minimum of £5,000 will be left across debtors’ accounts. This brings the UK in line with many other tax authorities which already have the power to recover debts directly from an individual’s account, such as France and the US."