Tories aim to raise extra £5bn a year in tax avoidance clampdown

The Conservatives are set to press on with efforts to counter tax avoidance and evasion, with measures on the way including the exchange of information with foreign tax authorities, reports the Financial Times.

All the major parties pledged in the election campaign to raise billions more each year from individuals not paying their “fair share”. But despite Labour’s higher counter-avoidance targets, it is Tory-led governments that have had more recent success in tackling the issue, said George Bull, senior tax partner at accountants Baker Tilly.

“One might think of these revenue targets as, at best, aspirational, yet the parties’ fiscal plans rely on achieving them,” said the IFS. “It is not helpful to the public debate to pretend that raising such sums is easy, certain or necessarily painless.”

Tessa Lorimer, special counsel at law firm Withers, said that while the pledges may be politically expedient, ambitious revenue targets “seem to be plucked from the sky”.

Counter-avoidance efforts have been stepped up over the past five years. Among powers granted to the tax authority are accelerated payment notices, which it can issue to claw back tax associated with disputed schemes.

While these notices are expected to generate up to £8bn over the next couple of years, the Revenue’s more aggressive targeting of avoidance has had a successful deterrent effect, with many fewer schemes promoted than in the 2000s, said Ms Lorimer.

“By the time APN income runs out, there will be little to replace it. The pipeline of billions the parties talk about is not there.”

Legislative changes that are already in train, however, could potentially deliver large amounts of unpaid tax to the exchequer.

Richard Morley, a partner at accountants BDO, said the automatic exchange of information from tax authorities overseas, starting in 2017, is expected to greatly assist the Revenue’s counter evasion efforts.

Under the “common reporting standard” (CRS), HMRC will receive details of international bank accounts held by UK taxpayers in most jurisdictions.

“The Revenue is playing the long game, waiting for the flow of information to start,” said Mr Morley. “I can only see an increase in enquiries post-CRS.”

Facilities that allow UK tax residents with undisclosed overseas assets to pay limited penalties and become compliant will close ahead of the automatic exchange of information.

The deadline for signing up to the Liechtenstein Disclosure Facility, used by many Swiss account holders, was brought forward from next April to the end of 2015 in this year’s Budget.

Participation in the facility has, however, been disappointing, said Mr Morley. While the LDF was expected to raise £3bn of undeclared income, total receipts — as of January — were barely above £1bn, official figures show.

The IFS noted in its analysis that both the Conservatives and Labour go beyond what is generally recognised as avoidance in their pledges, to include the targeting of “non-doms”, who often pay less UK tax by virtue of well-established laws.

In the case of the Labour proposal to abolish non-domiciled resident status, the IFS said it is possible that the policy “could raise virtually nothing or even cost money”.