More anti avoidance

The Government is to ramp up its assault on the tax avoidance industry with a new arsenal of weaponry set to be unleashed against ‘cowboy’ promoters of contrived and aggressive tax avoidance schemes.

Among the proposals revealed by David Gauke, Exchequer Secretary to the Treasury, include toughening up the Disclosure of Tax Avoidance Schemes (DOTAS) rules by giving HMRC stronger powers to force promoters to tell them about avoidance schemes and who is using them. It will also tighten rules to make it easier to impose penalties for failing to provide information to HMRC about a scheme.

The Government will also promote warnings about tax avoidance schemes that are being mis-sold and make it easier for taxpayers to realise when they “are on the receiving end of a hard sell by a less reputable promoter”.

David Gauke said: “Some might say that consultation documents on tax administration are an effective cure for insomnia, but this is one that will keep the promoters of aggressive tax avoidance schemes awake at night.

“We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill. These schemes damage our ability to fund public services and provide support to those who need it. They harm businesses by distorting competition. They damage public confidence. And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.

The DOTAS regime has already helped HMRC close down around £12.5bn in avoidance opportunities, Gauke revealed, adding that it would continue to adapt with the shifting avoidance landscape.

Since DOTAS was introduced in 2004 and the end of March 2012, 2,289 avoidance schemes have been disclosed to HMRC leading to over 60 changes in tax law to close down avoidance schemes.

At Budget 2012, the Government announced a range of anti-avoidance measures to bring in around £1bn and protect a further £10bn in future revenues from the tax avoidance ‘industry’ over the next five years.

More details are available from HMRC.