UK Budget 2020 – avoidance, evasion etc.

Mar 23, 2020

 

As has become traditional, the Budget announced a set of targeted anti-avoidance and evasion measures. The Budget 2020 measures are specifically targeted at the construction industry, tobacco, certain big businesses and promoters of tax avoidance schemes. The Government is aiming to raise an additional £4.7 billion overall between now and 2024-25 with these.

 

Responding to further recommendations in the independent Loan Charge Review, the Government will legislate in Finance Bill 2020‑21 to take further action against promoters and marketers of tax avoidance schemes. The legislation, which will take effect following Royal Assent, will include provisions designed to:  

 

  • allow HMRC to obtain information about the enabling of abusive schemes as soon as they are identified by strengthening information powers for HMRC’s existing regime to tackle enablers of tax avoidance schemes;
  • ensure enabler penalties are felt without delay for multi-user schemes, meaning anyone enabling tax avoidance arrangements that are later defeated will face a penalty of 100 per cent of the fees they earn;
  • enable HMRC to act promptly where promoters fail to provide information on their avoidance schemes. In particular, these changes will help HMRC obtain the information needed to bring a scheme into the Disclosure of Tax Avoidance Schemes regime and empower HMRC to act faster where avoidance schemes are being promoted;
  • equip HMRC to more effectively stop promoters from marketing and selling avoidance schemes as early as possible;
  • ensure promoters fulfil their obligations under the Promoters of Tax Avoidance Scheme (POTAS) regime, including where they have tried to abuse corporate structures to get around the rules;
  • make further technical amendments to the POTAS regime, including preventing spurious legal challenges from disrupting the process of scrutinising promoters, so the regime can continue to operate effectively; and
  • make additional changes to the General Anti-Abuse Rule so it can be used as intended to tackle avoidance using partnership structures

 

HMRC will also publish a new strategy for tackling the promoters of tax avoidance schemes which will outline the range of policy, operational and communications interventions both underway and in development to drive those who promote schemes out of the market, disrupt the supply chain to stop the spread of marketed tax avoidance, and deter taxpayers from taking up the schemes.

 

Legislation will be introduced to prevent non-compliant businesses from using the construction industry scheme to claim tax refunds to which they are not entitled. The Government is also publishing a consultation which introduces options on how to promote supply chain due diligence.

 

The Government will also legislate in Finance Bill 2020‑21 to make the renewal of licenses to drive taxis and private hire vehicles (PHVs, e.g. minicabs), operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax. These changes will take effect in England and Wales in April 2022. The Government is considering extending this reform to Scotland and Northern Ireland in the future and will work with the devolved administrations to this effect. 

 

A discussion document will be published in spring 2020 seeking views on the wider application of tax conditionality. Tax conditionality refers to a principle whereby businesses are granted access to Government awards and authorisations (such as approvals, licenses, grants) only if they are able to demonstrate good tax compliance.

 

The Government is also planning to invest in additional compliance officers and new technology for HMRC. This investment is aiming to bring in £4.4 billion of additional tax revenue up to 2024-25 by enabling HMRC to further reduce the tax gap “through additional compliance activity and expanding debt collection capabilities”.

 

Increased resources for Trading Standards and HMRC to combat the illicit tobacco trade were also announced, including the creation of a UK-wide HMRC intelligence sharing hub. The Government also plans to consult on proposals for stronger penalties for tobacco tax evasion.