This move is part of a plethora of changes which chancellor George Osborne hopes will boost the Government’s coffers by an extra £7.2bn in tax receipts in a year.
Osborne also announced that “tough new penalties” would be added to the Government’s General Anti-Abuse Rule (GAAR), a piece of legislation which defines abusive tax arrangements.
HM Revenue & Customs will be granted about £750m in investment to help it go after tax fraud, offshore trusts and the businesses of the hidden economy, Osborne revealed.
This extra cash, he said, would triple the number of wealthy evaders the Revenue pursues for prosecution.
Nowhere to hide
“In Budget after Budget, we have done more to combat this than any government before us.
“We inherited a system where bankers boasted of paying lower tax rates than their cleaners, and some multinationals shifted all their profits offshore,” he said. “We’ve stopped these blatant abuses that were allowed to flourish, and many others.
“These people should have nowhere to hide.”
Disappointing
Neal Todd, partner at City law firm Berwin Leighton Paisner, said it is disappointing that the chancellor has decided to introduce more penalties for tax planning that falls foul of the GAAR.
“The GAAR has only recently been introduced to the UK tax system (it became law in 2013) and its ambit is wide and uncertain,” he said.
“No case involved in the GAAR has yet come before the UK courts and it seems very premature for the government to be adding back bone to a weapon that has yet to be judicially tested.”
Ambitious
James Hender, partner and head of the private wealth group at Saffery Champness, said the chancellor’s plan to raise £7.2bn in tax by increasing investment into HMRC is “ambitious”.
“There is only so much that changing the law will do,” he said. “We wait to see whether HMRC will be properly supported in this drive.”
Socially acceptable
Ray McCann, partner at New Quadrant Partners, said – while the naming and shaming idea has been around for some time – the key phrase is “serial”.
“I suspect there are relatively few serial tax avoiders and the provision will most likely be restricted to prospective use only, so past ‘offences’ will not count. Of course ‘serial’ may mean something different to HMRC.
“Taxpayers who decide to give up their scheme without a fight may find that they are not named, but ultimately I remain of the view that tax avoidance is not as socially unacceptable as the Government would like.”
Waste of time
McCann also said introducing new penalties for the GAAR is a “waste of time and largely pointless” because taxpayers should not be advised to get involved in a scheme where the GAAR applied anyway.
“With the way the GAAR is structured, it is quite hard to see how a transaction where the taxpayer had taken proper advice from a reputable adviser could easily fall foul of the rule.”
Too early to judge
Andrew Hubbard, tax partner at Baker Tilly, said there is very little evidence yet of the use of the GAAR, partly because the rule only applies to transactions entered into on or after 17 July 2013.
“Those transactions will only recently have been reported to HMRC in annual returns and accounts, and therefore HMRC will only just have started to look at them to determine whether or not reference to the GAAR panel is necessary.”
“So while the GAAR has undoubtedly had a deterred effect on those who may have considered entering into avoidance arrangements it is too early to judge whether it will operate on transactions which have actually taken place.”
Badge of honour
Hubbard also said the proposal to name and shame serial avoiders is likely to make those people still actively seeking new avoidance opportunities think twice.
“But I would still expect some people to want to take the risk of publicity,” he added. “Indeed it is possible that some might see being named and shamed as a badge of honour.”
