Maintaining the UK’s tax competitive standing is clearly still a priority for the government. You’ve legislated for a further reduction in the headline corporation tax rate. Do you see rates going down even further?
We are committed to creating
the right conditions for businesses to invest and grow in the UK. Our reduction of the headline corporation tax rate allows the UK to be globally competitive and sends out the message that Britain is very much open for business
The government has committed to bringing corporation tax down to 18% by 2020, which is an extremely competitive rate. In terms of future changes to the rate, we keep the tax system constantly under review.
The headline rate is important, but so too is the effective rate of CT. Is there a case for increases in capital allowances?
We know that increasing capital allowances aids competitiveness. That’s why in the Summer Budget, we increased the permanent level of the annual investment allowance from £25,000 to £200,000 for investment in qualifying plant and machinery. This means that for many businesses, their effective rate of corporation tax will be lower in 2016 than it would have been had the government not intervened.
Our capital allowances are supporting business investment by lowering the effective tax rate that businesses pay. The Office for Budget Responsibility has said that it expects that the new annual investment allowance, alongside the proposed cuts to the corporation tax rate, will increase business investment by £1.6bn a year by 2020/21.
The Corporate tax roadmap published back in 2010 was very well received by big business. When is the next one due?
Businesses of all sizes want certainty to help them plan their investment with confidence about the environment in which they are operating. That’s why we’ve committed to going further than just a corporation tax roadmap and will publish a Business tax roadmap by April 2016. This document will not only discuss corporation tax, but will also set out our plans on business tax for the rest of theparliament.
The UK government is a supporter of the OECD’s BEPS project. What’s next?
The UK welcomes the progress that the OECD has made in delivering the BEPS package on time through the involvement of over 60 countries. We will give full consideration to the BEPS recommendations; in fact, we have already published an open consultation on interest deductibility and will be looking to engage with stakeholders on other recommendations in due course. We have been clear that the job does not end there. International agreement on BEPS is just the start of the process of reform. Further work will still be needed at both the international and domestic level to address BEPS.
Given the OECD’s work on BEPS, why did you introduce the UK diverted profits tax?
The diverted profits tax (DPT) was created to combat the diversion of profits from the UK by large multinationals that use aggressive tax planning techniques to avoid UK tax. These tactics undermine public confidence in the tax system.
The underlying objective of the DPT is essentially the same as the overall objective of the BEPS project: to ensure that profits are taxed where the economic activities giving rise to them are located.
Our message is clear: we want businesses to come to the UK and invest, but we expect those businesses to pay tax on profits that are earned in the UK. The DPT plays a vital role in countering the use of contrived arrangements and reinforcing the international rules against exploiting and eroding the UK tax base.
The government and the coalition before it have been truly innovative in tackling avoidance. Is the battle won? Would you like to go further, by regulating the tax profession, for instance?
Whilst the government has been relentless in its crackdown on tax avoidance and our measures have brought about significant successes, the valuable and legitimate role which the tax profession plays is not overlooked.
However, it is clear that in some parts of the profession there still remains a culture where advisers continue to seek to game the exchequer, providing advice on tax positions that clearly go beyond the intentions of Parliament.
I believe that the profession must play a more active role in tackling this culture and reassuring the wider public that it can indeed be trusted. The government has asked the regulatory bodies that police professional standards to maximise their role in establishing clear professional standards around the facilitation and promotion of avoidance. I look forward to seeing how the tax profession rises to the challenge.
Another measure which has raised some controversy is the strict liability offence for offshore tax evasion. Is it right to criminalise taxpayer error?
International tax transparency has been transformed over the last two years.
Under new international agreements, an unprecedented amount of information on offshore accounts will be available to HMRC from 2017 onwards. Building on this, the government is toughening the sanctions available to deal with tax evaders and those who facilitate tax evasion. To strengthen the deterrents available for the very worst cases of tax evasion, we are introducing a simpler criminal offence for offshore evasion.
If people have concerns, we want to hear them, which is why we have just concluded a consultation on this measure. We sought views on appropriate safeguards and we will be publishing our response to this consultation in due course.
Does HMRC have enough resource?
The government invested almost £1bn in HMRC over the last spending review period to transform HMRC’s approach to compliance. This investment contributed to the delivery of more than £100bn in additional compliance revenues over the spending review period to the end of 2015/16.
At the Summer Budget, the chancellor announced a range of new measures, including £800m of investment over the parliament, to strengthen HMRC’s ability to tackle evasion, reduce avoidance and improve voluntary compliance.
Part of this investment is about using data to identify and tackle tax risks more effectively. HMRC is making better use of its huge amounts of data to work smarter and for less money. Last year, HMRC brought in record compliance revenues while making £210m in sustainable cost savings, exceeding the government’s target.
On BEPS:
‘The work is not over yet and effective implementation of the different outputs by all relevant jurisdictions c will be critical to cement the accomplishments to date. Work is underway with already more than 90 countries participating in the development of the multilateral instrument for the implementation of the treaty-related BEPS in an efficient manner.’
Pascal Saint-Amans and Raffaele Russo, The OECD (Tax Journal, 31 October 2015)
On large businesses:
‘We’ve seen a move away from the use of structured avoidance products over the last ten years. We hope that in five years’ time, such products will be a thing of the past, and that we will see a similar shift away from aggressive tax planning towards increased transparency, low-risk tax strategies and voluntary compliance.’
Judith Knott, HMRC’s director of large business (Tax Journal, 6 November 2015)
On HMRC's work on BEPS and international tax compliance:
‘The new transfer pricing guidelines represent real progress, but we believe there is still some way to go in delivering a fully comprehensive global approach to tackling transfer pricing abuses.’
Jim Harra, HMRC’s business tax director general (Tax Journal, 31 October 2015)
On the role of the Solicitor’s Office:
‘I’m particularly proud of some of the wins we’ve had in the last year. The Icebreaker film scheme was a long journey but a big success. We’ve also had great successes with Next, P&O and Pendragon. In fact, we seem to get a stonking great win every week.’
Gill Aitken, HMRC’s General Counsel and Solicitor (Tax Journal, 7 August 2015)
On HMRC’s analysis and research work:
‘More consistent data sharing by departments like HMRC, the Department for Work and Pensions and the Ministry of Justice would open up huge avenues for researchers and would transform how we design public services. It’s no secret that HMRC is supportive of proposals to amend the existing legislation to make this possible and I think this will continue to be our view.’
Mike Hawkins, deputy director of HMRC’s Knowledge, Analysis and Intelligence directorate (Tax Journal, 12 June 2015)
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