Tax & Accounting News

Government Gets Tough On Tax Evaders

29/10/2009

The government has launched its strongest commitment yet to tackle tax evasion, with a series of crackdowns on popular avoidance schemes.

Financial secretary Stephen Timms MP recently announced a series of changes to legislation to counter schemes notified to HM Revenue and Customs (HMRC), including an end to ‘sideways loss relief’ in circumstances where the loss arises from arrangements where the main purpose was to obtain tax relief.

He pledged this would not impact on those who had made genuine income tax losses in their financial affairs, but highlighted an ‘aggressive’ new scheme HMRC had recently encountered, which intentionally generated losses in a professional partnership for offset by users of the scheme against their other income or capital gains.

Other schemes which the new legislation aims to prevent include:

• The use of unauthorised unit trusts which avoid restrictions on double tax relief and generate ‘repayments’ of tax which has never been received by HMRC.
• The use of manufactured overseas dividends (MODs) instead of real dividends to work around anti-avoidance rules.
• The use of UK-manufactured interest payments to avoid tax under rules relating to controlled foreign companies.

Mr Timms said: “The government will not tolerate tax avoidance or tax evasion in any form and will act promptly to tackle both of these. It is unfair on the majority of taxpayers, undermines fiscal stability and reduces funding for public services.”