The Spring Statement 2019 was, as expected, rather short on announcements on tax proposals. There were, however, a number of statements in the area of tax avoidance and evasion, some of which were a direct result of the need to report to Parliament on the effectiveness and impact of tax avoidance measures that were included in the Finance Act 2019.
The government published two policy papers on 13 March 2019:
and further details on these are set out below.
Tax avoidance, evasion and non-compliance
No statement by the UK Chancellor would be complete without a statement or paper on how the government is tackling tax avoidance, evasion and non-compliance.
This year, the Chancellor had an added requirement he needed to meet because, under sections 92 and 93 of the Finance Act 2019, he had to report within six months on the effectiveness and impact of various tax avoidance measures included in that same Act. The required report is included in the paper as Annex B, being the last 10 pages of the 62-page report. Those MPs who managed to have this requirement added to the Finance Bill (it was a late amendment) were, we presume, expecting the report to be produced based on some actual experience of how the measures worked in practice. However, many of the anti-avoidance measures, for example the profit fragmentation provisions in s16 and Schedule 4, do not take effect until 6 April 2019. The MPs will, therefore, be disappointed in this response: by reporting on the measures before they have been introduced, the Chancellor has outwitted them. As it stands, Annex B does not really add anything to what we know about these measures.
Instead, the Chancellor took the opportunity, once again, to set out all the measures the government has introduced since 2010 to tackle tax avoidance, evasion and non-compliance. A useful summary of these 100-plus measures is in Annex A. If you need an aide memoire for all the tax avoidance measures introduced in recent years, Annex A is the go-to place! According to the report, as a result of these measures the government has secured over £200bn of tax that would otherwise have gone unpaid. After all of this activity, you might be asking what more measures the government is planning to introduce, and the answer is found in the final paragraph (page 25) as follows:
“The government and HMRC will continue [their] mission to ensure everyone pays what they owe, and will bring forward further reforms at future fiscal events as necessary.”
In short, no new measures are proposed at the current time, although the government is still consulting on some measures that have been announced previously.
No Safe Havens 2019: offshore tax compliance
This is a complementary paper to the above and sets out the direction for HMRC’s updated strategy for offshore tax compliance. Unlike the tax avoidance/evasion paper, it has (annoyingly) been published only as individual chapters in HTML format rather than complete in one pdf.
The paper is described as an update to the government’s offshore compliance strategy, which was last published in 2014. However, most of the report is taken up with describing HMRC’s success in tackling non-compliance generally, whether or not it has an offshore element. The title of the paper is, therefore, slightly misleading and it is essential reading for all tax advisers whether or not their clients have an offshore element to their affairs.
The paper focuses on three areas and there is a chapter devoted to each of them:
HMRC will continue to work with other jurisdictions to develop international tax standards that help ensure offshore tax compliance. HMRC will continue to champion international collaboration and the exchange of tax information.
HMRC will provide appropriate help to ensure that taxpayers understand their obligations and get their tax right first time. It intends to use data, including the information being received through the Common Reporting Standard, to help promote offshore tax compliance. It will pilot the use of prompts in the foreign pages of the online self assessment return.
HMRC also recognises the important role played by agents in ensuring that taxpayers pay the right amount of tax and will work in partnership with agents to do this, including promoting good standards of tax advice. HMRC will support the professional bodies (including ICAEW) in upholding the standards set out in the Professional Conduct in Relation to Taxation (PCRT) and will also explore opportunities to work with other jurisdictions to promote comparable standards in the provision of UK tax advice in their jurisdictions.
This describes the various measures and tools that HMRC has at its disposal to tackle tax avoidance, evasion and non-compliance and how it uses them to tackle problems it identifies. The section sets out HMRC’s approach to tackling non-compliance, whether or not it is offshore or onshore. There is little new information in this section but it is stated that the forecast yield from the Panama Papers is over £190m and that HMRC has protected £3.3bn in tax revenues in the past two years.
Over the next few months the government will publish the following papers:
Preventing abuse of the R&D tax relief for small- or medium-sized enterprises (SMEs) – This will be a consultation on a measure announced in the Budget 2018.
Insurance Premium Tax operational review – A call for evidence on where improvements can be made to ensure that Insurance Premium Tax operates fairly and efficiently.
VAT Administration in the Isle of Man – HM Treasury will publish a paper and recommendations to ensure the right VAT continues to be paid and collected in the Isle of Man on the importation of aircraft and yachts.