Perception that ‘odds are stacked’ against HMRC drives evasion, report says

A perception that the odds are stacked against HM Revenue & Customs and in favour of business impedes the effectiveness of the tax authority’s anti-evasion efforts, according to research that identifies four “distinct profiles of evader” among small and midsize businesses in the UK.

For any intervention strategy to work there is a basic requirement for those evading to “believe that there is a real risk that the evasion will be detected and proven,” said Quadrangle Research Group, a London-based consultancy that conducted the research in April 2016. “The main barrier to effectiveness” is that this is not currently the case, Quadrangle said in a report published on HMRC’s website on September 29.

A new offence listed in the Criminal Finances Act, failure to prevent the facilitation of tax evasion, came into force on September 30. HMRC published guidance on September 29, inviting companies and partnerships to “report on their own behaviour”. Read more:

My news story for Tax Analysts, September 30 (paywall)

HMRC research report: September 2017: Understanding evasion by Small and Mid-Sized Businesses

HMRC guidance September 29: ‘Tell HMRC about a company helping people to evade tax’

HMRC press release September 30: ‘Stop facilitating tax evasion or face criminal prosecution, HMRC tells corporations’

UK tax experts question law firm regulator’s warning over schemes

Solicitors and law firms could face greater scrutiny over aggressive tax avoidance schemes, according to a warning notice issued by the Solicitors Regulation Authority, but tax experts called for clarification of some aspects of the guidance.

“Like the rule of law, tax underpins the effective running of our society and economy,” said SRA chief executive Paul Philip in a September 21 release. “Solicitors play an important role in helping taxpayers meet their legal obligations. The government has been clear that the common assertion that tax avoidance is legal no longer applies.” The SRA regulates 130,000 solicitors and law firms in England and Wales …

“The strongly-worded warning contains some comments that are surprising,” the [ICAEW Tax Faculty] said. “For example it says that when advising a client on a tax avoidance scheme that fails ‘you will leave yourself open to the risk of disciplinary proceedings as well as committing a criminal offence [our emphasis].’ This appears rather sweeping and may need further clarification,” the faculty added.

Judith Freedman, professor of tax law at the University of Oxford, told Tax Analysts that the SRA notice and accompanying press release “do seem to be poorly worded in places.” Read more:

My news story for Tax Analysts, September 22 (paywall)

UK tax advisers welcome new HMRC service for expanding businesses

Expanding UK businesses are to receive tailored tax assistance from growth support specialists at HM Revenue & Customs who will offer help with tax queries and support in accessing reliefs and incentives.

“Mid-sized businesses make a vital contribution to the U.K. economy and I want to see them grow, succeed, and prosper,” Mel Stride, financial secretary to the Treasury, said in a September 20 statement.

About 170,000 UK businesses with turnover of more than £10 million or more than 20 employees are eligible and can apply online, HMRC said. Industries that could benefit include manufacturing, information and communications, and professional services, including legal and accountancy services. Read more:

My news story for Tax Analysts, September 21 (paywall)

HMRC flags potential costs of Brexit contingency planning

Uncertainty over the outcome of negotiations on the UK’s post-Brexit customs arrangements may force HM Revenue & Customs and traders to incur expenditure that could turn out to be unnecessary, officials told the House of Commons Treasury Committee September 14.

Committee Chair Nicky Morgan asked Jim Harra, HMRC’s director general for customer strategy and tax design, when he would need to know the outcome of negotiations with the EU-27 countries, which have not yet begun, to be able to start “putting things in place.”

“We’ve been advising the Department for Exiting the European Union and advising ministers on what the choices are . . . and the future partnership paper has been produced,” Harra said. The UK government’s proposals for a future customs relationship with the EU, published August 15, outline two broad approaches … Read more:

My news story for Tax Analysts, September 15 (paywall)

UK invites feedback on tax measures for 2018

HM Treasury and HM Revenue & Customs are consulting on draft legislation for the UK’s next finance bill, which will form part of the 2018 Finance Act.

Eight consultations were published September 13, a day after members of Parliament approved the second finance bill of 2017, which will now proceed to its committee stage.

The new consultations relate to the bank levy, disguised remuneration avoidance schemes, interest on debt traded on a multilateral trading facility, landfill tax, offshore trusts, income tax for partnerships, registration of pension schemes, and payments on termination of employment. Draft legislation, explanatory notes, and tax information and impact notes are provided, and comments are invited by October 25. Read more:

My news story for Tax Analysts, September 14 (paywall)

UK lawmakers approve finance bill as Brexit overshadows debate

Members of Parliament approved the UK’s second finance bill of 2017, voting 320 to 299 after six hours of debate at the bill’s second reading September 12.

The bill will now proceed to its committee stage in October, after a three-week recess for the annual political party conferences. It is expected to become the second finance act of 2017 in November. Read more:

My news story for Tax Analysts, September 14 (paywall)

Parliament website: Finance Bill 2017-19