New DOTAS proposals lead consultation surge

HMRC’s civil servants have been working overtime in the run up to their summer holdiays and have unleashed a flood of consultation documents and draft legislation.

Tax avoidance is never far from the top of the tax department’s agenda, so among more than 100 announcements in the past  10 days, HMRC has released a further document on Strengthening the tax avoidance disclosure regimes.

The proposals come hot on the heels of the accelerated payments and follower notice provisions in the Finance Act 2014, which raised the stakes for determining which schemes will be caught in the net.

Most of the suggestions concern ways to tighten the net around arrangements caught by the disclosure of tax avoidance schemes (DOTAS), which are now subject to the upfront payments. Other ideas include bringing IHT and VAT avoidance within the scope of DOTAS.

Between now and the consultation deadline on 23 October include:

  • Removing the ‘grandfathering’ rule that omits schemes that are similar to arrangements made before 1 August 2006
  • Widening the “hallmarks” of DOTAS-reportable schemes, for example to include a list of involving loans, derivatives and other financial products that give rise to a tax advantage
  • Increased penalties for scheme users who do not notify a DOTAS scheme reference number in the correct box on the tax return.

Baker Tilly’s David Heaton took a dim view of the VAT proposals in this week’s Tax Brief, arguing that VAT is covered by separate EU directive. “It strikes us that in light of subsequent VAT anti-avoidance legislation and developing case law, we don’t actually need listed VAT schemes any more. Extending DOTAS to treat VAT avoidance the same way as income and corporation tax, CGT, NICs, SDLT, IHT and ATED “would just be plain daft”, he argued.

Other documents released in HMRC’s summer consultation surge include:

Capital gains tax - Legislating extra-statutory concession D33
Proposals to increase to £1m the limit on the amount of compensation automatically exempt, with amounts in excess of £1m chargeable to CGT, and to legislate the relief for personal compensation or damages (HMRC). Launched 31 July; Closes 15 September

Corporation tax - Loan relationships and derivative contracts
Draft regulations amending regulations dealing with the tax treatment of loan relationships and derivative contracts to take account of changes in accounting standards (HMRC). Launched 7 August; Closes 12 September

Employee travel and subsistence review
A review of the rules underlying tax treatment of travel and subsistence expenses, announced at Budget 2014 in response to an Office of Tax Simplification report on employee benefits and expenses (HM Treasury). Launched 31 July; Closes 23 October

Implementing agreements under the global standard on automatic exchange of information
Draft legislation to implement agreements to be entered into between the UK and overseas jurisdictions to adopt the Common Reporting Standard on Financial Account Information (CRS) (HMRC). Launched 31 July; Closes 22 October

Draft Taxation of Pensions Bill
Draft legislation to enact changes to pension tax rules, announced at Budget 2014, to give individuals greater flexibility accessing pension savings (HMRC). Launched: 6 August; Closes 3 September

Registered pension schemes and annual allowance charge
Draft legislation to ensure that changes made by Finance Act 2011 to the annual allowance charge provisions in Finance Act 2004 work as intended (HMRC). Launched 29 July; Closes 27 August

VAT mini one stop shop
Technical consultation on amendments to VAT regulations to allow for introduction of the mini one stop shop (MOSS). From January 2015 suppliers of digital services will be required to account for VAT in the member states where their customers are located. MOSS will allow businesses to register in one member state only and submit a single VAT return and payment payment for all cross border supplies of digital services (HMRC) . Launched 7 August; Closes 26 August