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Autumn Statement: new penalty for tax avoidance enablers

Autumn Statement: new penalty for tax avoidance enablers

Chancellor Philip Hammond has announced tax avoidance measures expected to save £2 billion.

The government will introduce a new penalty for those who enable tax avoidance, which the HMRC later challenges and defeats. This is expected to raise £2 billion over the forecasted period.

It will also extend the removal of teh tax benefits of disguised earnings for employees to self-employed and employers. This will raise £630 million.

By denying tax relief for an employer's contributions to disguised remuneration schemes unless tax and NI are paid, the government is looking to make it less attractive for employers to use them. 

It will also abolish tax advantages afforded to employee shareholder status 'in response to evidence it is primarily being used for tax-planning purposes by high-earning individuals.'

The last Budget had already introduced a number of measures in relation to disguised remuneration legislation.

Back in August, the Treasury also revealed new proposals to penalise what it called ‘enablers’ of tax avoidance such as advisers and accountants.

The proposals, part of a consultation, suggest that advisers, tax planners and accountants who help with tax avoidance could face fines up to 100% of the tax avoided or £3,000, whichever is higher.

Kate Ison, a senior associate in the tax team at Berwin Leighton Paisner, said: ‘We are disappointed that the government is proceeding to introduce measures imposing a penalty on “enablers” of avoidance. 

'This will restrict the ability of taxpayers to access independent and professional tax advice in relation to routine or well established tax planning.’

Multi-nationals

The chancellor also said that ‘the pitch is tilted in favour of large multi-national groups’. The government will implement new restrictions on tax relief on corporate interest expense and reform the way relief has been provided.

This is expected to take effect in April to ensure that companies do not borrow excessively in the UK and avoid tax. It is expected to raise £5 billion.

The governement will also be investing further in HMRC to increase its counter avoidance activity and help take cases to litigation. This is expected to bring forward £450 million in scored revenue by 2021-22. 

In the last Budget, announced by then-chancellor George Osborne, there was also a crackdown on the use of personal service companies and by employers to reduce their income tax and national insurance contributions.

It also included measures aimed at increasing tax from multi-national companies as well as civil penalties for tax evaders.

 


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