UK Autumn Budget 2018 – avoidance, evasion et al

Nov 12, 2018

The by now usual plethora of measures were announced on Budget day targeted at avoidance, evasion and “unfair outcomes” in UK tax legislation.

Profit fragmentation

The government intends to introduce targeted legislation to prevent UK businesses from avoiding UK tax by arranging for their UK-taxable business profits to accrue to entities resident in territories where significantly lower tax is paid than in the UK. The taxable UK profits will be increased to the actual, commercial level.

Reforming stamp taxes on shares consideration rules

A consultation will be launched on aligning the consideration rules of stamp duty and stamp duty reserve tax. A general market value rule for transfers between connected persons will also be introduced.  From 29 October 2018, a targeted market value rule will be introduced for listed shares transferred to connected companies.

Electronic sales suppression (ESS)

The government will publish a call for evidence later in the year on ESS. ESS refers to the misuse of electronic point of sale functions (i.e. till systems), which is undertaken by a minority of businesses in order to hide or reduce the value of individual transactions and the corresponding tax liabilities.

Insolvency

Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.

Conditionality: hidden economy

Following the consultation ‘Tackling the hidden economy: public sector licensing’ published in December 2017, the government will consider legislating at Finance Bill 2019-20 to introduce a tax registration check linked to licence renewal processes for some public sector licences.

Applicants would need to provide proof they are correctly registered for tax in order to be granted licences. This would make it more difficult to operate in the hidden economy, helping to level the playing field for compliant businesses.

International tax enforcement: disclosable arrangements

The government is enacting new legislation to allow the introduction of international disclosure rules about offshore structures that could avoid tax, or could be misused to evade tax.

Offshore tax compliance strategy

The government will publish an updated offshore tax compliance strategy. The government’s previous strategy was published in 2014.