The Chancellor has said the government will raise more than £5bn by tackling tax evasion and “aggressive” tax avoidance.
George Osborne promised to increase HMRC’s capacity and resources by investing £750,000 to raise £7.2bn in extra tax.
He said: “We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.”
Tax evasion and avoidance are also no longer the only areas under the microscope, as the Chancellor indicated that tax “planning” would also be targeted and generate savings.
The Budget document reveals the government will raise, “…£5 billion by 2019-20 from tackling tax avoidance and tax planning, evasion and compliance, and imbalances in the tax system.”
The government will also strengthen the General Anti-Abuse Rule (GAAR) with tougher tax geared penalties, as well as naming and shaming ‘serial avoiders’ of failed tax avoidance schemes.
The government document reads: “The government will consult on the technical details of introducing tougher measures for those who persistently enter into tax avoidance schemes that fail, including a surcharge on those whose latest tax return is inaccurate due to use of a failed scheme and publishing the names of such avoiders.”
It added that the GAAR penalty will be proportional to the amount of tax recovered by the GAAR.
Alongside closing LDF and other disclosure facilities, the introduction of automatic exchange of information is expected to lead to a significant increase in HMRC compliance activities and enquiries.
Permanent non dom status abolished
In addition to increasing HMRC’s anti-avoidance resources, the Chancellor committed to ending permanent non-domicile status.
Osborne noted the “fundamental unfairnesses” in the non-dom regime and has abolished permanent non-dom tax status.
“Anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains,” he said.
The government will now consult to “get the detail right”.
The new measures will come into effect in April 2017, and are expected to raise £1.5bn in extra tax over this parliament.
From April 2017 the government will also introduce new rules so that everybody who owns residential property in the UK and would otherwise pay inheritance tax on that property cannot avoid paying it by holding it in an offshore structure.
About Robert Lovell
Business and finance journalist