Autumn Budget 2017: Tax avoidance by individuals

Offshore avoidance
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Eric Williams, Head of Tax at Mazars LLP reviews the tax avoidance measures aimed at individuals which are progressing through the legislation pipeline.

Tax scheme designers

The government will soon publish the responses to the consultation document on the proposed requirements for tax scheme designers which use offshore structures for tax evasion, to notify HMRC of these structures. This could potentially cover all offshore structures, and the proposal is likely to be taken forward in conjunction with the OECD and the EU.

Enablers of tax avoidance

The recent new legislation in F(No.2) Act 2017, Sch 16, effective from 1 January 2018, imposes penalties for “enablers” of tax avoidance, demonstrates a significant extension of the HMRC attack on avoidance. The proposals will introduce a disclosure requirement and potential penalties for any adviser in the tax avoidance advisory supply chain.

The “enablers” legislation focuses on those who benefit financially from enabling others to implement tax avoidance arrangements which ultimately fail. Activities which constitute enabling will include designing, marketing and financing arrangements, or providing advice that is key to achieving the avoidance objective or implementing the scheme.

Offshore trusts

The new restrictions on non-doms, effective from 6 April 2017, will also be extended to catch any benefits derived from offshore trusts (i.e. not on a remittance basis) by close family members related to the settlor.

Extending offshore time limits

Hitherto, HMRC has experienced difficulty in demonstrating that a taxpayer deliberately used an offshore structure to evade tax. For example, many taxpayers would have set up offshore structures after having taken appropriate tax and legal advice. This has left HMRC with the headache of assessing within the six-year time limit for failing to take reasonable care, where tax evasion is suspected.

The “Requirement to Correct” Legislation introduced in F(no. 2)A 2017, extends assessing time limits by four years. However, the Budget now proposes a consultation document in Spring 2018 to address the introduction of extended assessing time limits for non-deliberate offshore tax non-compliance from six years to a minimum of 12 years.

This proposal, if enacted, especially if the proposed 12 year (or longer) period extends to penalties, has the potential to bring in significant funds to the Exchequer from historic tax planning and tax avoidance arrangements, which may not have been implemented correctly.

Conclusion

These new proposals, and recent new measures, taken together with further consultation on additional anti-avoidance measures, (eg to tax UK immovable property owned by non-UK resident companies and individuals), demonstrate the government’s continued commitment to countering (legal) tax avoidance as well as (illegal) tax evasion. 

About Eric Williams

Eric Williams

Eric Williams is the UK Head of Tax for Mazars. Eric has spoken extensively at external conferences on tax planning for non-domiciled and domicile, residence tax, inheritance tax and estate planning for wealthy individuals. He is also experienced in tax defence work and negotiations with tax authorities in cases of tax avoidance and serious tax fraud.

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27th Nov 2017 13:21

You mention that the Enablers Legislation comes into force on 1st January 2018. Royal Assent of the Finance Act appears to be 16th November and Schedule 16 Para 62 implies that the Enablers comes into force on that day. Am I right or have I got the wrong end of the stick?

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