Following consultation, the Government will enhance penalties for offshore tax evasion through new rules targeting the use of multiple IHT trusts, and a new penalty of up to a further 50% for multinationals moving hidden funds to avoid international tax agreements.
The Government will also update the legislation covering ‘high risk’ promoters to include broader controls and a clarification of the time limits in which HM Revenue & Customs can issue conduct notices to promoters who fail to disclose a scheme.
"Serial tax avoiders"
Graham Webber, head of professional relations at Rebus, said an HMRC provision to publically publish information on such promoters “fits in with a continued ‘name and shame’ policy with threats of identifying ‘serial tax avoiders’”.
However, he added that the announcement of an increase in the level of the remittance basis tax for non-domiciled individuals is likely to offset these effects.
In its full statement, the Government also announced it will be reviewing its existing framework for offering financial incentives for information on offshore tax evaders, with a particular focus on those who remain outside the reach of international efforts to achieve tax transparency.
Webber added that HMRC is known to have paid “hard cash” for lists of those with offshore bank accounts, pointing towards the Swiss and Lichtenstein Disclosure Facility programmes as examples.
“However, the Swiss agreement in particular delivered less than it promised,” he added. “The announcement notes indicate that this value is being revised upwards, but it remains a political embarrassment and perhaps just a sticking plaster.”
Additionally, the Government announced it will be introducing legislation to counter the avoidance of income tax through miscellaneous loss relief.
Legislation in the Finance Bill 2015 will deny a person miscellaneous loss relief for income tax purposes where a loss arises as a result of relevant tax avoidance arrangements.
The Government also alluded to its recently announced increase of safeguards around its controversial direct recover of debts scheme, which will enable HMRC to directly recover tax and tax credit debts from bank accounts.
“Such a power, combined with new rules to allow parts of a tax appeal to be settled whilst other continue, risk bringing unfair pressure to bear on individuals and businesses to agree to settlement on terms that owe more to the view of individual case officers rather than the law,” said Webber.
Perfect tax storm
John Cassidy, partner at leading audit, tax and advisory firm Crowe Clark Whitehill, added that the statement demonstrates HMRC’s “very aggressive” stance on tax evasion, particular offshore.
“It adds up to a perfect storm for those with undeclared assets, huge amounts of new data for HMRC to work with; an automatic assumption of guilt; and increased fines once the number crunching is complete,” he said.
He added that anyone with offshore assets and structures should now take the opportunity to review their tax position.
“Although evasion may not be relevant, experience shows that there is often something to declare which, in the future, may be automatically deemed to be criminal.”
In his speech, Osborne announced that the personal allowance will increase to £10,600 in 2015.
This is a rise of £100 on the predicted increase to £10,500 from the £10,000 set in this year’s Budget.
“It is the first step to the new goal we have set of raising the personal allowance to £12,500,” he added.
The Treasury said the increase will be worth £120 to a typical basic rate taxpayer and £172 to a typical higher rate taxpayer. It added that this will benefit over 24 million individuals and remove 430,000 individuals from income tax altogether.
Osborne also announced a rise in the ISA allowance to £15,240 from £15,000, which will commence from April next year.
Additionally, from 3 December, if an ISA saver in a marriage or civil partnership dies, their spouse or civil partner will inherit their ISA tax advantages.
Osborne also introduced a reform of the stamp duty system, in which each rate will only apply to the part of the property price that falls within that band.
"One-off mansion tax"
Previously, the controversial tax was charged at a single slab rate, meaning the highest applicable tax band applied to the whole purchase price of a home.
Under the new rates, a homebuyer will pay no tax on the first £125,000 paid, 2% on the portion up to £250,000, 5% up to £250,000, 5% up to £925,000, 10% up to £1.5m, and 12% on anything over that.
Gary Richards, partner at law firm Berwin Leighton Paisner, said: “The public will welcome the long-overdue reform, moving away from a slab system, but there is a danger that this will slow down residential activity at the higher end of the housing market.
“This is effectively another name for a one-off mansion tax," he added.
