We know that tax avoidance is the crime du jour but George Osborne let rip with both barrels in his Autumn Statement this year. A volley of measures were announced that the Government hope will hit the mark, raising an estimated £6.8bn until April 2019. That’s the headline but what is behind the ‘bellicose barracking’ – we look at the small print.
The policy analysis counts 13 decisions as revenue raising anti avoidance measures. Other measures, whilst earmarked as having no net income effect to the Treasury, will still have an impact on UK businesses.
The big money lies with an attack on onshore employment intermediaries. This is aimed at stopping taxes being avoided by using service companies and disguising an employer/employee relationship. If the worker is really an employee their tax obligations will be calculated as such.
The administration aspects of tax management were not ignored with accelerated payments of tax due on ‘follower cases’ being introduced. This means that if you are a litigant in a group case and the lead case is lost to HMRC, you will have to pay the disputed tax at that point rather than wait for your own action to be determined, affecting cashflow.
The relationship between group companies and where they recognise profits continues to be under the microscope with changes made to the world wide debt cap (WWDC) provisions and profit shifting using controlled foreign companies (CFCs) targeted.
Most of these measures are from 5 December but we have retrospective changes too. Poor old partnerships are subjected to further pain with a ‘mixed membership’ hit. HMRC’s aim is to stop situations where partnership profits are allocated to a non-individual partner in circumstances where an individual member may benefit from those profits.
A second blow will affect cases where partnership losses are allocated to an individual partner, instead of a non-individual partner, resulting in the individual accessing certain loss reliefs. The changes will take effect from 6 April 2014 with the exception of anti-avoidance rules concerning tax-motivated profit allocations.
And what of the less ‘valuable’ measures – these may be expected to raise less revenue but they are well distributed across the tax payer population. Charities, promoters of tax schemes, litigants against HMRC, non domiciled international workers and those who choose to hold offshore investments should be on their guard. We will continue to analyse these individual announcements and update our thoughts here.