Chancellor creates 60% penalty for GAAR tax cases
HMRC introduces new measures to tackle tax avoidance
The Chancellor has introduced a new penalty equal to 60% of tax due for all cases successfully tackled by the General Anti-Abuse Rule (GAAR).
The GAAR was introduced in 2013 as part of the government’s attempt to crack down on tax abuse.
It applies to taxes such as income tax, capital gains tax, and inheritance tax and gives HMRC powers to claim money back from arrangements it deems abusive.
GAAR takes priority over other parts of tax legislation and sits alongside several hundred targeted anti-avoidance rules (TAAR) which apply to particular tax provisions.
The government will also introduce new measures for those who persistently enter into tax avoidance schemes that are defeated by HMRC.
The measures include a special reporting requirement and a surcharge on those whose latest return is inaccurate due to use of a defeated scheme, the names of such avoiders being published and, for those who persistently abuse reliefs, restrictions on accessing certain tax reliefs for a period.
It will also widen the Promoters of Tax Avoidance Schemes (POTAS) regime, bringing in promoters whose schemes are regularly defeated by HMRC.
George Osborne told parliament in his Autumn Statement on 25 November: “We said £5bn would come from the measures on tax avoidance, evasion and imbalances. Those measures were announced at the Budget.
“Today we go further with new penalties for the General Anti-Abuse Rule we introduced, action on disguised remuneration schemes and stamp duty avoidance, and we will stop abuse of the intangible fixed assets regime and capital allowances.”
Osborne added the government will make changes to the way the GAAR works to improve its ability to tackle marketed avoidance schemes.
BDO tax dispute resolution partner Richard Morley said: “It was no secret that the government wanted to introduce a penalty aimed predominantly at serial abusers of tax avoidance schemes which consistently fail before the Courts. The penalty will be a way to claw back some of the money spent pursuing the serial avoiders.
“It has also been announced that there will be small changes made to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes. This again highlights HMRC’s determination to crackdown on those who had previously taken the system for granted.”
Law firm BLP head of tax Michael Wistow said: “Constant change to the GAAR vindicates ‘thin end of the wedge’ concerns voiced by advisers at the time of its introduction. The need for checks and balances was acknowledged at that time but these are being swept away with constant populist tinkering.”
The government plans to digitise the way businesses manage their taxes, giving every small business their own digital tax account by the end of the decade.
It will then introduce measures which require capital gains tax to be paid within 30 days of completion of any disposal of residential property.
