No safe haven – past, present or future!
Tax avoidance has been the subject of particular press coverage and comment for over a year now and the Budget brings together “the largest package of anti avoidance measures ever”. There are various announcements on specific targeted areas such as partnerships and certain IHT points where the Government consider these have been used in marketed tax avoidance schemes. These sit alongside the new General Anti Abuse Rule (GAAR), which is due to come into force, and are against a backdrop and environment of encouraging disclosure where clients may have become used to enjoying confidentiality in shielding assets overseas.
The General Anti Abuse Rule (GAAR) – the future
This will apply to arrangements entered into after Royal Assent (expected in July 2013). Often wrongly referred to as a general anti avoidance rule, the terminology is important in explaining the aims of its introduction - the counteraction of abusive schemes. It is not intended to prevent normal conventional tax planning.
The rule will apply as one would expect to Income Tax, NIC, Corporation Tax, Capital Gains Tax but also to Petroleum Revenue tax, Stamp Duty Land Tax and the new Annual Residential Property Tax.
If HMRC considers the GAAR can apply then the case will be referred to an independent advisory panel and if the panel agrees then “just and reasonable” counteraction will be taken which may take one of a number of forms depending on the point in question.
Exchange of Information Agreements – the future
Following the success of the UK/Swiss Agreement, exchange treaties are being put in place between the UK and Jersey, Guernsey and the Isle of Man. These will ensure that financial institutions disclose the assets they hold on behalf of residents in the other jurisdiction to try to ensure there is no hiding place going forward.
The Isle of Man Disclosure Facility (MDF) – the past and present
If anyone has undeclared sums from the past, the MDF offers an opportunity to bring matters up to date. In a way not dissimilar to the LDFs and other previous amnesties, people who wish to take advantage of the disclosure facility must apply to participate from the 5 April 2013 and before the 30 September 2016. During this period all liabilities which have arisen from 6 April 1999 must be disclosed to HMRC. The MDF is not available to anyone who has already used a previous disclosure facility nor to anyone who has a Swiss bank account which is covered by the UK/Swiss Agreement. Penalties will be fixed at somewhere between 10% and 40% depending on the severity of the position. HMRC is offering certain other incentives including the possibility of discussion on an anonymous basis beforehand and a promise of not publicly naming the person concerned.
Although similar agreements for Jersey and possibly Guernsey are anticipated , t raises the question of how many more of these type of arrangements can be introduced and would suggest that if anyone has any undisclosed liabilities in the UK, wherever in the world the income arose, that they seek advice sooner rather than later.
Date: 22nd March, 2013
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