Other measures announced
Anti avoidance
Three tax avoidance schemes will be blocked with effect from Budget Day:
- sales of certain leasing companies, which previously avoided corporation tax charges through a change in ownership;
- schemes which avoid the corporation tax degrouping charge, by including intermediate, artificial transactions; and
- certain stamp duty land tax schemes, which exploit reliefs arising by use of alternative (Islamic compliant) finance arrangements or the exchanges of land relief.
Legislation will also be introduced to block avoidance schemes that have been identified since the last Budget.
New data-gathering powers for HMRC
The Finance Bill 2011 will include measures to ‘modernise' HMRC's information powers by introducing a single set of general rules.
Notably, HMRC will be able to specify the format in which data is to be provided so that it may be more easily processed. The Government claims that the latest reforms will:
- allow HMRC to use bulk information powers to gather specific pieces of information about a group of taxpayers, for use in risk analysis;
- introduce specialist ‘unnamed taxpayer' powers that are narrowly defined in law to be used in very specific circumstances during a compliance check, such as when it is not clear who the taxpayer is;
- allow HMRC to apply to the tribunal for increased daily penalties where data is not supplied;
- cover data about certain foreign taxes; and
- provide a penalty if a person is aware of an inaccuracy when providing information or documents and to correct a minor error in the legislation.
These changes are expected to be introduced from 6 April 2012 and will lead to a significant increase in HMRC's powers.
Security for PAYE & NICs
Legislation in Finance Bill 2011 will introduce a power to allow HMRC to make regulations enabling them to require a security from employers for PAYE that is seriously at risk. The measure will also introduce a criminal offence for non-payment of a security.
Once the new power is in place, HMRC will use existing powers to make equivalent provision in respect of NICs.
Disguised remuneration
The Government will introduce measures to block arrangements involving trusts and other third party vehicles that "seek to avoid or defer the payment" of income tax and national insurance contributions. These measures will be backdated to 9 December 2010.
These new provisions will affect employee benefit trusts and employer financed retirement benefit schemes (EFRBS). Following consultation, certain exclusions have been included to ensure the measures do not catch arrangements beyond the intended scope. Sums contributed to employee trusts and "earmarked" for providing benefits to particular employees will now be subject to PAYE and national insurance contributions (NIC).
The rules will catch:
- loans and other assets made available to employees;
- distributions to the families of ex-employees;
- distributions to ex-employees who have moved abroad; and
- unapproved employee share schemes and pension arrangements run through trusts.
Legislation will be brought in to take effect from 6 April 2011 and anti-forestalling provisions will apply to cover transactions after 9 December 2010.
Mutual Assistance Recovery Directive (MARD)
Legislation will be introduced in Finance Bill 2011 to enable the UK to implement the MARD agreed by EU Finance Ministers during 2010. Under this Directive EU Member States can provide each other with assistance in the recovery of tax debts and duties, which includes service of documents and exchanging information in connection with the recovery of claims.
This measure fulfils the UK's EU obligations by implementing the Directive which provides reciprocal arrangements for recovering and enforcing tax debts and for the exchange of information across the EU.
The Directive becomes fully applicable on 1 January 2012 and the UK legislation incorporating the Directive and setting out the detailed rules will come into force on that date.
Online tax calculator
The Government will build an online personal tax calculator by 2012 to allow individuals to estimate how much income tax and NICs they pay.
Move from RPI to CPI
From April 2012 the default indexation assumption for all direct taxes including income tax, NICs, inheritance tax, capital gains tax and Individual Savings Account limits, will move from the Retail Price Index (RPI) to the Consumer Price Index (CPI).
