Adding to the recently added penalties for ‘enablers’ of offshore evasion and carelessness and the planned new corporate criminal offence of failing to prevent the ‘facilitation’ of tax evasion, the Autumn Statement was notable for me for its continued focus on measures to tackle and punish intermediaries between HMRC and taxpayers.
Register of offshore structures
In particular, plans were announced to consult on introducing a requirement to register offshore structures. The measure will apply to ‘intermediaries arranging complex structures for clients holding money offshore’ and will require them to notify HMRC of the structures and related client lists. Clearly, this could have a huge impact on professional advisers, banks, funds, and trust and company service providers. Little detail is available, but I doubt HMRC will be shy in trying to impose the rules on intermediaries based outside the UK, despite the obvious challenges in trying to impose sanctions outside a country’s own legal jurisdiction.
It also has to be asked why this measure is considered necessary at all in the light of the Common Reporting Standard which should shine light on these structures in any event. Perhaps HMRC prefer to have information provided to them in a particular way in order to save on the cost of having to analyse the CRS data – and the new proposal may also provide some form of early warning system.
Avoidance penalties
The government also confirmed it will press ahead with new penalties for ‘enablers’ of ‘defeated’ avoidance, despite the widespread condemnation of the proposal by the professional bodies and financial sector. Nothing has been published but the proposed legislation is said to ‘reflect’ the responses to the consultation. The tone of the consultation paper suggests that the penalties were targeted at the designers and promoters of dodgy ‘schemes’ to the masses, but it did not expressly say so. Worryingly, ‘defeated’ included arrangements which simply fall foul of a ‘targeted anti-avoidance rule’. Given that the tax code is littered with TAARs, it would be difficult for a taxpayer to seek bespoke professional advice on a one-off transaction if the penalties will apply in such a scenario.
Public registers
There was nothing mentioned about the consultations on central registers for trusts and foreign companies owning UK real estate, led by the Treasury and Department for Business, Energy & Industrial Strategy respectively. The trust register is driven by the 4th Anti-Money Laundering Directive which, pursuant to a proposed amendment the European Commission made in July, member states are urged to put in place by January 2017 (we may have missed that particular boat). The real estate register is a UK-only initiative (although the US is working on a register of sorts) but was very much a flagship policy of the Cameron and Osborne days. But I doubt that it has also bitten the Brexit dust.
VAT
It was confirmed that a new penalty regime will be introduced for businesses and their officers who knew, or should have known, that they were buying or selling goods in a fraudulent supply chain. The penalty is proposed to be 30% of the VAT in question irrespective of whether actual or constructive knowledge is proved. HMRC is undecided on whether mitigation will be offered for cooperation. Those businesses operating in high risk sectors should also consider their potential exposure to the anti-tax evasion facilitation offence I mention above.
Changes to the VAT avoidance disclosure regime to move the primary burden of notification from the user to the promoter of the scheme was confirmed. It was also confirmed that the Fulfilment House due diligence scheme will be introduced with effect from April 2018, in an attempt to stem the loss of VAT from non-EU companies selling goods, typically through online market places, to UK customers without being registered for VAT.
Litigation
Following a two year long consultation, it has been confirmed that new legislation will be introduced to allow HMRC to ‘partially’ close an enquiry. The current system creates gridlock if HMRC is not able to close off all the items in a return in one go, which has led some taxpayers to abuse the system in avoidance cases. Happily, the provisions will be ‘two-way’, i.e. a taxpayer will be able, as with a full closure notice, to apply to the tribunal for a direction forcing HMRC to issue a partial closure notice.
Buried away in the costings information is a note that this measure, with two others, will bring in £450m over the six year projection period 2016/17 to 2021/22. The other two measures relate to improved analytics to spot insolvencies and a reference to increased resources being deployed, amongst other things, to increase the number of cases challenged under the general anti-abuse rule (presumably that means from none to some – or maybe even just one…)
Interestingly, the costings analysis suggests that there will be a net cost of £195m for these measures in 2016/17 and 2017/18, suggesting that there will be a large increase in spending initially, with the results coming in over the following four years. The first intake of permanent members of the GAAR panel are all coming to the end of their terms next year and the chair is running a recruitment drive for their replacements. (Before you salivate at the apparent money being thrown around and wonder whether to throw your hat in the ring, please bear in mind that a panel member is an unpaid positon.)
The job spec says that it suits someone who ‘recently retired’. If the penalties aimed at enablers of avoidance are drawn as widely as first feared, there might be quite a few tax advisers who meet that brief!
Home >Articles > Autumn Statement 2016: Enforcement and compliance aspects
Autumn Statement 2016: Enforcement and compliance aspects
Adding to the recently added penalties for ‘enablers’ of offshore evasion and carelessness and the planned new corporate criminal offence of failing to prevent the ‘facilitation’ of tax evasion, the Autumn Statement was notable for me for its continued focus on measures to tackle and punish intermediaries between HMRC and taxpayers.
Register of offshore structures
In particular, plans were announced to consult on introducing a requirement to register offshore structures. The measure will apply to ‘intermediaries arranging complex structures for clients holding money offshore’ and will require them to notify HMRC of the structures and related client lists. Clearly, this could have a huge impact on professional advisers, banks, funds, and trust and company service providers. Little detail is available, but I doubt HMRC will be shy in trying to impose the rules on intermediaries based outside the UK, despite the obvious challenges in trying to impose sanctions outside a country’s own legal jurisdiction.
It also has to be asked why this measure is considered necessary at all in the light of the Common Reporting Standard which should shine light on these structures in any event. Perhaps HMRC prefer to have information provided to them in a particular way in order to save on the cost of having to analyse the CRS data – and the new proposal may also provide some form of early warning system.
Avoidance penalties
The government also confirmed it will press ahead with new penalties for ‘enablers’ of ‘defeated’ avoidance, despite the widespread condemnation of the proposal by the professional bodies and financial sector. Nothing has been published but the proposed legislation is said to ‘reflect’ the responses to the consultation. The tone of the consultation paper suggests that the penalties were targeted at the designers and promoters of dodgy ‘schemes’ to the masses, but it did not expressly say so. Worryingly, ‘defeated’ included arrangements which simply fall foul of a ‘targeted anti-avoidance rule’. Given that the tax code is littered with TAARs, it would be difficult for a taxpayer to seek bespoke professional advice on a one-off transaction if the penalties will apply in such a scenario.
Public registers
There was nothing mentioned about the consultations on central registers for trusts and foreign companies owning UK real estate, led by the Treasury and Department for Business, Energy & Industrial Strategy respectively. The trust register is driven by the 4th Anti-Money Laundering Directive which, pursuant to a proposed amendment the European Commission made in July, member states are urged to put in place by January 2017 (we may have missed that particular boat). The real estate register is a UK-only initiative (although the US is working on a register of sorts) but was very much a flagship policy of the Cameron and Osborne days. But I doubt that it has also bitten the Brexit dust.
VAT
It was confirmed that a new penalty regime will be introduced for businesses and their officers who knew, or should have known, that they were buying or selling goods in a fraudulent supply chain. The penalty is proposed to be 30% of the VAT in question irrespective of whether actual or constructive knowledge is proved. HMRC is undecided on whether mitigation will be offered for cooperation. Those businesses operating in high risk sectors should also consider their potential exposure to the anti-tax evasion facilitation offence I mention above.
Changes to the VAT avoidance disclosure regime to move the primary burden of notification from the user to the promoter of the scheme was confirmed. It was also confirmed that the Fulfilment House due diligence scheme will be introduced with effect from April 2018, in an attempt to stem the loss of VAT from non-EU companies selling goods, typically through online market places, to UK customers without being registered for VAT.
Litigation
Following a two year long consultation, it has been confirmed that new legislation will be introduced to allow HMRC to ‘partially’ close an enquiry. The current system creates gridlock if HMRC is not able to close off all the items in a return in one go, which has led some taxpayers to abuse the system in avoidance cases. Happily, the provisions will be ‘two-way’, i.e. a taxpayer will be able, as with a full closure notice, to apply to the tribunal for a direction forcing HMRC to issue a partial closure notice.
Buried away in the costings information is a note that this measure, with two others, will bring in £450m over the six year projection period 2016/17 to 2021/22. The other two measures relate to improved analytics to spot insolvencies and a reference to increased resources being deployed, amongst other things, to increase the number of cases challenged under the general anti-abuse rule (presumably that means from none to some – or maybe even just one…)
Interestingly, the costings analysis suggests that there will be a net cost of £195m for these measures in 2016/17 and 2017/18, suggesting that there will be a large increase in spending initially, with the results coming in over the following four years. The first intake of permanent members of the GAAR panel are all coming to the end of their terms next year and the chair is running a recruitment drive for their replacements. (Before you salivate at the apparent money being thrown around and wonder whether to throw your hat in the ring, please bear in mind that a panel member is an unpaid positon.)
The job spec says that it suits someone who ‘recently retired’. If the penalties aimed at enablers of avoidance are drawn as widely as first feared, there might be quite a few tax advisers who meet that brief!
