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New measures to tackle promotion of tax avoidance

HMRC has published a series of a consultations together with details of proposed legislative changes to existing anti-avoidance regimes to strengthen HMRC’s ability to further clamp down on the market for tax avoidance.

The proposals include:

  • ensuring HMRC can effectively issue stop notices to promoters, under the Promoters of Tax Avoidance Scheme (POTAS) rules, to make it harder to promote schemes that do not work
  • preventing promoters from abusing corporate entity structures to avoid their obligations under the POTAS rules
  • ensuring HMRC can obtain information about the enabling of abusive schemes (for the purposes of the Enablers Penalty Regime) as soon as they are identified and ensuring enabler penalties are felt without delay when a scheme has been defeated at tribunal
  • ensuring that HMRC can act quickly and decisively where promoters fail to provide information on their avoidance schemes under the Disclosure of Tax Avoidance Schemes (DOTAS).
  • making further technical amendments to the POTAS regime so that it continues to operate effectively and to ensure that the General Anti Abuse Rule (GAAR) can be used to counteract partnerships as intended.

The consultation is open for comment until 15 September 2020. The new measures are expected to be included in the Finance Bill 2020-21.

Source: HM Revenue & Customs Tue, 28 Jul 2020 05:00:00 +0100

HMRC to gain new civil information powers

A new measure that will provide HMRC with additional civil information powers is expected to take effect when the Finance Bill 2020-21 receives Royal Assent. The new measure known as a Financial Institution Notice (FIN) will be used to require financial institutions to provide information to HMRC, when requested, about a specific taxpayer and without the need for approval from the independent tribunal that considers tax matters.

Currently it takes HMRC on average 12 months to respond to requests for third party financial information from other tax authorities when an information notice is needed, whereas the target under international standards is six months. The introduction of the new FIN will remove the current requirement for HMRC to obtain approval from the tax tribunal before obtaining information from financial institutions and therefore bring the UK into line with international standards on tax transparency and on the quality and speed of exchange of tax information.

The FIN will be balanced by a number of taxpayer safeguards, including:

  • the information sought will have to be reasonably required for the purpose of checking a known taxpayer’s tax position. For international requests, the information in the FIN will need to be relevant to the administration or collection of tax and the jurisdiction requesting the information would need to have exhausted all reasonable domestic ways to get the information;
  • documents subject to legal professional privilege cannot be requested;
  • HMRC will be required to tell the taxpayer why the information is needed, unless a tax tribunal rules this condition should not apply;
  • an authorised officer of HMRC (someone with the relevant experience and training) will need to approve the decision to issue a FIN;
  • if a Financial Institution does not comply with a FIN, and as a result HMRC charges penalties, the Financial Institution will be able to appeal against the penalties

In addition, HMRC is required to report to Parliament annually on the use of the FIN.

Source: HM Revenue & Customs Tue, 28 Jul 2020 05:00:00 +0100

Making Tax Digital next steps

HM Treasury has confirmed the extension of Making Tax Digital (MTD) to cover businesses with a turnover below the VAT threshold and for certain individuals who file Income Tax Self-Assessment tax returns. This announcement provides much-needed clarity of the way forward for this scheme.

MTD started in April 2019 (for VAT purposes only) when businesses with a turnover above the VAT threshold of £85,000 became mandated to keep their records digitally and provide their VAT return information to HMRC using MTD compatible software. Since the launch more than 1.4 million businesses have joined the programme.

The first part of the further roll-out of MTD will start April 2022, when MTD will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000. This will be followed one year later (April 2023) when MTD will be extended to taxpayers who file Income Tax Self-Assessment tax returns for business or property income over £10,000 annually.

HMRC has said that the long lead-in time will allow businesses, landlords and agents time to plan. It also gives software providers enough notice to bring a range of new products to market, including free software for businesses with the simplest tax affairs.

Financial secretary to the Treasury Jesse Norman said:

'We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century. Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.'

The government has also confirmed that it remains committed to extending MTD to other taxes. The government will also consult later this year on the detail of extending MTD to incorporated businesses with Corporate Tax obligations.

Source: HM Treasury Wed, 22 Jul 2020 05:00:00 +0100

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