The Chancellor’s long running battle with the tax avoidance industry continued today with a range of measures aimed at planning undertaken by large corporates and the very affluent. Departing from the tendency to identify the enormous potential revenue raising potential of stopping “tax cheats” and instead citing the fact that every pound invested by the government in the fight against tax avoidance yielded ten pounds in revenue, Mr Osborne announced a number of targeted rules to block tax planning.
The long standing General Anti-Abuse Rule or GAAR was given some teeth so that, if HMRC successfully challenge a taxpayer under GAAR a penalty of up to 60% of the tax due will be levied. The announcement also suggested that HMRC’s apparent lack of enthusiasm for actually applying the rules is to change and revenues of over £10m are expected to be raised in the next tax year.
One of the oldest anti-avoidance measures, known as the Transactions in Securities rules, is also set to be reviewed and a Targeted Anti-Avoidance Rule or TAAR will be introduced in order to prevent opportunities for income to be converted to capital in order to gain a tax advantage. This, together with potential legislation to amend entrepreneurs’ relief such that it is only available for “certain genuine commercial transactions”, was worryingly vague and many hoping to benefit from that most valuable relief will watch the promised consultation with interest.
In the “minority sport” category measures to address exploitation of capital allowances regulations, structures to avoid tax on leasing arrangements and cross-border business financing were also introduced.