Autumn Statement 2013: Tax Avoidance

 

As part of our preview of Autumn Statement 2013, David Bennett, tax partner at Moore and Smalley offers his thoughts on what government will do to combat tax avoidance.

 

An Autumn Statement would not be complete without further measures to combat tax avoidance. The only difference these days is that tax avoidance is now at the top of the agenda, rather than being buried in the detail.

 

It seems likely that foreign owned property will be Mr Osborne’s first target. Currently, there is generally no capital gains tax payable on UK properties where they are owned offshore. In March 2013, a CGT charge was introduced on residential properties valued at £2m+ when held in offshore companies. This might well turn out be the thin end of a long wedge, with the next stage being the extension of CGT to properties held by non UK resident individuals, and a lowering of the £2m threshold.

 

HMRC has signalled possible changes in the rules for loans to director/shareholders. Currently, these attract a tax charge of 25% of the loan, although the tax can be reclaimed when the loan is repaid. HMRC believes this is too generous, and has tabled proposals increasing the tax payable, and making part of it a permanent charge. I expect these to be firmed up in Thursday’s announcement.

 

Limited liability partnerships (LLPs) will also be the focus of new legislation. In particular, LLP structures involving corporate members will be hit, and the self employed status of salaried partners will be put in doubt. HMRC issued some poorly thought out proposals earlier in the year, and it is hoped that they will study carefully the feedback from the consultation process  before embarking on new legislation.

 

Many people have called for a crackdown on tax avoidance schemes. In fact, the number of registered schemes has fallen to an all time low, while the number of tax prosecutions has doubled. There has been a distinct redeployment of resources within HMRC, away from taxpayer support and into tax investigations. The trend is likely to continue.

 

Osborne will also be addressing the question of where the global profits of multinationals are taxed. This will involve a fundamental shake up of the rules governing international taxation, and will take years rather than months to implement.  Margaret Hodge is therefore unlikely to abandon her boycott of Amazon this Christmas.