The government published a document alongside the Budget papers Tackling tax avoidance, evasion and non-compliance setting out its record since 2010 in tackling tax avoidance etc and listing the measures that it has introduced over this period. It estimates that these measures have brought in addition revenue of almost £160bn.
The main measures announced in the current Budget are described below and these are estimated to bring in a further £4.8bn, para 3.65 of the Red Book, although the score-card in Table 2.1estimates that all the avoidance, evasion etc measures will bring in a grand total of £5.57bn..
Tackling avoidance and evasion with additional resources for HMRC
HMRC will receive a further £155m which is forecast in the Red Book to bring in an additional £2.3bn from the measures set out below.
The extra resources, and technology, will allow HMRC to:
Royalties – withholding tax from April 2019
With effect from April 2019, withholding tax will apply to royalty payments, and payments for certain other rights, made to low or no tax jurisdictions in connection with sales to UK customers. The rules will apply regardless of where the payer is located.
The Budget score-card estimates that this will raise £285m in the first year, 2019-20, and £800m over the full 4 years to 2022-23.
Intangible fixed assets: related party step-up schemes
The Intangible Fixed Asset rules will be updated with immediate effect, so that a licence between a company and a related party in respect of intellectual property is subject to the market value rule, and to ensure that the tax value of any disposal of a company’s intangible assets is correct, even if the consideration is in something other than cash.
This measure is estimated to bring in extra revenue of £240m over the next 6 years.
The government will remove the 6-year time limit within which companies must adjust for transactions that have reduced the value of shares being disposed of in a group company. This will ensure that any losses claimed are in line with the actual economic loss to the group. This change will take effect for disposals of shares or securities in a company made on or after 22 November 2017.
This measure is estimated to bring in extra revenue of £55m over the next 6 years.
Insolvency - use to escape tax debt
The government will expand existing security deposit legislation to corporation tax and Construction Industry Scheme deductions. These changes will be legislated for in Finance Bill 2018-19 and take effect from 6 April 2019. The government will consult on the most effective means of introducing this change.
This measure is estimated to bring in extra revenue of £505m in the 4 years from 2019-20.
Taxation of carried interest
Legislation was introduced with effect from 8 July 2015 (F(No 2) A 2015) to determine the taxation of carried interest, which is a form of performance related reward for investment managers.
There were transitional rules to excluded amounts of carried interest which had been subject to delays in payment for genuine commercial reasons and which were in relation to disposals of partnerships assets before 8 July 2015, or (in other circumstances) before 22 October 2015.
Carried interest will now be taxed if it arises on or after 22 November 2017 irrespective of the timing of connected disposals of partnership assets.
This measure is estimated to bring in extra revenue of £650m in the six years up to and including 2022-23.
Faster recovery of self assessment debt
HMRC will use new technology to recover additional Self-Assessment debts in closer to real-time by adjusting the tax codes of individuals with Pay As You Earn (PAYE) income. These changes will take effect from 6 April 2019 and are estimated to bring in extra revenue of £125m over the following 4 years.
VAT fraud in labour provision in the construction sector
Following a consultation into options for tackling fraud in construction labour supply chains, the government will introduce a VAT domestic reverse charge to prevent VAT losses. This will shift responsibility for paying VAT along the supply chain to remove the opportunity for it to be stolen.
The changes will have effect on and after 1 October 2019. The long lead-time reflects responses to the consultation and the government’s commitment to give businesses adequate time to prepare for the change.
ICAEW responded to the consultation in June 2017 ICAEW REP 69/17 Fraud on provision of labour in construction sector: consultation on VAT and other policy options
This measure is estimated to bring in extra revenue of £405m in the 4 years from 2018-19.
Online VAT fraud: extending powers to UK businesses
The government will extend HMRC’s powers to hold online marketplaces Jointly and Severally Liable (JSL) for the unpaid VAT of overseas traders on their platforms to include all
(including UK) traders. This extension will help tackle the UK hidden economy and eliminate the risk of overseas traders establishing a UK shell company simply to escape the existing JSL regime.
This new provision will come into force on Royal Assent in spring 2018 and is estimated to bring in extra revenue of £165m.
Tackling waste crime
From 1 April 2018, operators of illegal waste sites will become liable for Landfill Tax, and those who continue to flout the rules will face tough civil and criminal sanctions. This follows a positive response to the consultation announced at Spring Budget 2017. In addition, the government is providing £30 million extra funding over the next four years to help the Environment Agency tackle waste crime and reduce the harm caused to the environment and to legitimate operators.
This measure is estimated to bring in extra revenue of £215m over the 5 years from 2018-19 onwards.