The Government confirmed its commitment to tackling tax evasion and avoidance, alongside aggressive tax planning and non-compliance. Those 'seeking to evade or avoid tax using offshore structures' are of particular interest to HMRC. In addition, time limits for HMRC assessments of non-deliberate offshore tax non-compliance will be extended to 12 years.
A discussion document will be published in 2018 to explore further methods of preventing perceived abuse of the insolvency regime to evade or avoid tax liabilities, including through the use of phoenixism.
Finance Act 2016 introduced a new targeted anti-avoidance rule (TAAR) to prevent ‘phoenixism’. This is where solvent companies are liquidated so that shareholders dispose of their shares to realise a capital gain, potentially subject to a capital gains tax (CGT) charge rather than paying income tax on the profits that would otherwise be distributed. A similar business is then set up to continue the previous trade.
As part of the 2017 Autumn Budget, it has been announced that further discussions will take place in 2018 to ensure that the insolvency regime is not being used to either avoid or evade tax that is due.
"The Government is clearly concerned that people are circumventing the TAAR and benefiting from the disparity between CGT and income tax rates through the insolvency regime. We can therefore expect to see further rules announced following this period of discussion to tackle this perceived abuse."
The Government has announced that it will publish a response to the consultation on its proposal to require notification to HMRC of some offshore structures. Under this proposal, intermediaries creating or promoting certain complex offshore financial arrangements will be required to notify HMRC of their creation. The response will be published on 1 December 2017.
In early 2017, the Government consulted on a legal requirement for intermediaries to notify HMRC of various defined types of complex offshore arrangements and the related lists of clients using them. The Government has now announced its intention to publish a response to the consultation. As the OECD and EU are also considering similar measures, the Government will feed the responses to the consultation into the work carried out internationally.
"As we have commented previously, the proposals can be seen as part of the gradual tightening of tax anti-avoidance rules, together with increased sharing of financial information between governments, under the common reporting standards.
"We await further details of the proposals, including the specific hallmarks by which an arrangement would need to be notified. These remain the subject of a future consultation."
The Government announced that it will extend the time limit for HMRC to assess offshore tax non-compliance to at least 12 years. This extended limit will apply where the behaviour is not deliberate. There will be a consultation on this in Spring 2018.
Where non-compliant behaviour is involved, HMRC will have at least 12 years to assess all offshore cases. No detail is provided on what constitutes an offshore case. This allows for the fact that it can take HMRC much longer to establish the facts where offshore non-compliance is involved.
No commencement date has been announced, but there will be a consultation on this in spring 2018.
The current 20 year time limit will still apply where the behaviour is considered deliberate.
"This is a significant extension to the current time limit for non-deliberate behaviour of four years, or six years where the behaviour is found to be careless.
"This change will mean that taxpayers will in the future have much less certainty over historic offshore tax matters, and where genuine mistakes have been made this could come back to bite at a much later date."
The Government has announced that it will invest a further £155 million in new technology and further resources for HMRC.
It is envisaged that this investment will enable HMRC to further tackle the hidden economy, marketed tax avoidance schemes, enablers of tax fraud and non-compliance among wealthy individuals and mid-size businesses. A new taskforce will also be set up to tackle tax debts that are more than 9 months old. The Government estimated that this will help bring in additional tax revenues of £2.3 billion.
"HMRC has confirmed its commitment to crack down on tax avoidance and evasion, the latter being a significant part of the tax gap. This additional investment will help provide the tools to enable it to do this."