UK Consults On Anti-VAT Avoidance Measures
The UK Government has launched a consultation on plans to make the disclosure of value-added tax avoidance schemes (VADR) system more closely resemble the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
According to the consultation, “VADR should be more closely aligned with DOTAS to provide early information on new avoidance schemes and new use of existing schemes, and data on the users of the schemes, while remaining proportionate in terms of administrative burdens.”
The Government pointed out that although both VADR and DOTAS began operating in 2004, “unlike DOTAS, VADR has not been significantly updated since it was introduced. The number of disclosures has declined, the regime has not kept pace with changes in the VAT avoidance landscape, and it is no longer fulfilling its policy intentions.”
VADR requires disclosure to be made by those who use an avoidance scheme. Under DOTAS, promoters of avoidance schemes are required to make the disclosures, and to provide regular updates to HM Revenue and Customs (HMRC) and scheme users after the disclosure.
The Government has proposed that under a reformed VADR, promoters of VAT avoidance schemes would be required to disclose their schemes to HMRC and to comply with ongoing obligations to provide further information to both HMRC and scheme users following the initial disclosure.
The consultation document also contains a section on proposed reforms to the DOTAS hallmark for inheritance tax (IHT), to ensure that it operates more effectively. The Government intends to extend the scope of the hallmark to ensure that arrangements that seek to avoid IHT charges on death and on other lifetime transfers have to be disclosed. The Government wishes to remove the existing grandfathering provision in the hallmark, so that schemes that are newly implemented or sold to clients after the proposed changes take effect must be disclosed, even if they were first made available before April 6, 2011.
