Following delivery of the Autumn Statement, HMRC has confirmed that draft legislation for the new regime will be published on 11 December. The consultation process ended in the summer. Some notable representations received by the Government during the consultation process related to the following issues:
The very short available time for restructuring if the new regime comes into effect in April 2013.
Using a charge to capital gains tax to effectively enforce the payment of SDLT is illogical and produces some perverse results – for example under the current proposals, the sale of shares by a non-UK resident individual in a company owning a high-value dwelling will be outside the scope of SDLT and CGT, whereas the sale of the dwelling itself by the company will be subject to both SDLT and CGT.
The need to define precisely how offshore partnerships will be categorised for the purposes of the proposed annual charge and CGT.
A plea for some exemptions from the new regime, for example where there are unconnected investors in a fund which owns a dwelling.
It is to be hoped that the draft legislation will address these and other issues raised.
"Plus ça change, plus c'est la même chose may be the epitaph of the Autumn Statement. In 2005, HMRC announced (in somewhat Panglossian fashion) that tax avoidance would be ended by 2008; the Autumn Statement implicitly confirms that, some four years later, this aim has yet to be achieved, and, indeed, probably never will be. There are, however, a number of measures with the objective of curbing "tax avoidance" that have been announced.
- A General Anti Abuse Rule ("GAAR"). The Government has taken note of some of the responses to the consultation exercise. It will amend the "double reasonableness" test to seek to ensure that the GAAR is not a "broad spectrum antibiotic", but targets abusive arrangements only; and the commencement date will no longer be 1 April 2013, but will be the date that Finance Act 2013 becomes law. Extensive draft guidance has been published for consultation.
- Finance Bill 2013 will give the Treasury the ability to make regulations to extend the information powers under the DOTAS rules.
- New penalty rules for the promoters of structures disclosable under the DOTAS rules .
- Certain anti-avoidance provisions (in relation to foreign bank levies, tax mismatch schemes, property return swaps, manufactured payments, and income tax relief on payments of patent royalties) come into force with immediate effect on 5 December 2012
- a settlement opportunity for "long standing avoidance schemes involving partnership losses"
- a consultation on using the Government's procurement process as a way of deterring tax avoidance (which suggests the tax compliance record of private sector bidders will become a relevant factor regarding the award of government).
In addition, an additional £77m has been allocated to HMRC to target "avoidance, evasion and fraud." Closing the tax gap by focussing on monies not accounted for through avoidance, and evasion, is clearly one of the Government's principal ways of raising additional monies. Given the increase in resources and the tools available to HMRC, that is likely to be successful; check-mating the players in the game of tax avoidance (despite the numerous extra pieces on one side of the board) is not."
"Measures targeting tax evasion and avoidance rightly grabbed the headlines, conveniently coinciding with the public debate on those issues spurred on by the Public Accounts Committee and pressure groups such as UK Uncut. These are interesting times for tax lawyers, although a chill wind doth blow and tax professionals could quickly become the new bankers.
The 1% reduction in corporation tax is welcome, albeit not taking effect until 2014/2015. It's a shame that there was no corresponding announcement on the small profits rate, although the substantial increase in the AIA will be encouraging for those SMEs with funds to invest.
Our AIM team was pleased to see the Government consulting on expanding the qualifying investments for equity ISAs to include AIM shares and securities on other markets. AIM shares already qualify for EIS relief and can be held in SIPPs, and it is right that they be ISAable too. The impact remains to be seen, but it can only be good news for AIM companies and could over time increase the investment pool and improve liquidity. The reduction in the annual allowance for pension contributions to £40,000 from 2014/2015 may leave investors looking harder for a tax-efficient alternative such as ISAs and EIS/VCTs."