Tax specialists advocate cautious response to Paradise Papers

More could be done to tackle tax avoidance and evasion, but it is important not to tar all offshore activity with the same brush in the wake of the Paradise Papers, UK tax professionals suggested. One expert said simplification could reduce opportunities for those who seek to abuse the system.

As UK lawmakers and campaigners stepped up demands for greater transparency, Jonathan Riley, head of tax at Grant Thornton UK LLP, told Tax Analysts that the controversy “may represent the last chance for the tax profession to show it takes evidence of artificial tax avoidance seriously and will not promote it.” Riley noted that advisers are subject to many disclosure and compliance rules but tax is “still largely self-regulated.” It will be interesting to see whether the tax and accountancy bodies’ code on Professional Conduct in Relation to Taxation, updated with effect from March, is invoked in any cases featured in the Paradise Papers, he said. Read more:

My news story for Tax Analysts, November 17 ($)

UK lawmakers debate EU withdrawal bill

The UK government stressed its intention to preserve the UK’s constitutional integrity while avoiding the creation of a hard border with Ireland, as members of the House of Commons began detailed scrutiny of the European Union (Withdrawal) Bill.

James Brokenshire, secretary of state for Northern Ireland, has stressed that the government intends to “avoid any physical infrastructure” on the land border between Northern Ireland and the Republic of Ireland. “We welcome the European Commission’s commitment to this as an important step forward,” he told members of Parliament on November 15.

My news story for Tax Analysts, November 16 ($)

UK government urged to implement public country-by-country reporting

The Paradise Papers revelations show that tax avoidance has become “a scourge on our society” and illustrate the need for public country-by-country reporting, Dame Margaret Hodge told members of the UK Parliament as she led an emergency debate November 14 while the government continued to defend its record of tackling avoidance and evasion.

Hodge, chair of an all-party parliamentary group on responsible tax, said the debate was urgent because Chancellor of the Exchequer Philip Hammond was putting the finishing touches on the budget statement, scheduled for November 22. “The actions and the culture of powerful, large corporations and of the wealthiest in our society, as revealed in the Paradise Papers, constitute a national and international disgrace,” Hodge said …

The Paradise Papers have exposed a crisis of confidence, Conservative MP Nigel Mills said. “We need our tax system to be fair and our financial system to be legally compliant and as clean as we can make it.” Read more:

My news story for Tax Analysts, November 15 ($)

House of Commons debate of November 14 on tax avoidance and evasion: transcript

US excise tax proposal invites retaliation, UK tax professionals say

A US excise tax on payments to related foreign corporations is a hostile measure that may violate bilateral tax treaties and prompt retaliation, UK tax professionals warned, as they presented their initial assessment of the Tax Cuts and Jobs Act.

“It does seem to be a very interesting move by revenue authorities to build a kind of firewall within a jurisdiction, to say that you can only have a deduction to the extent that there’s a corresponding taxable amount in that jurisdiction,” said John Kilby, head of tax at Canary Wharf Group plc. “You could argue that it’s very clever of the [US] administration because it could force more jobs back to the US.”

Kilby was addressing participants at a November 6 conference on U.S. tax reform at the London office of Herbert Smith Freehills LLP. Sponsors included Tax Analysts and Sharp Partners P.A. Read more:

My news story for Tax Analysts, November 8 ($)

[Here’s an update from Jonathan Curry (free to view), published November 9.]

The September finance bill: an overview

While this week’s Paradise Papers revelations have rekindled the public debate and added pressure for further action to deter tax avoidance and evasion, for many businesses and tax advisers the immediate concern is keeping on top of changes already announced.

The second finance bill of 2017 has now completed its House of Commons stages, and will be considered ­– although it cannot be amended – by the House of Lords on 15 November, just a week before the chancellor is set to deliver his autumn budget. Consultation on several measures to be included in the next finance bill closed on 25 October …

My article for AAT Comment, November 7

HMRC will recruit up to 5,000 extra staff to prepare for Brexit

HM Revenue & Customs will recruit up to 5,000 additional staff in 2018, the UK government said less than a week after HMRC Chief Executive and Permanent Secretary Jon Thompson told a parliamentary committee that the department was planning to review its priorities in the light of uncertainty created by Brexit …

“Alongside the negotiations in Brussels, it is crucial that we are putting our own domestic preparations in place so that we are ready at the point that we leave the EU,” a spokesman for Prime Minister Theresa May said after [an October 31 cabinet meeting]. “Cabinet heard many of these will be needed even in our preferred scenario of a bold and ambitious deal — for example, implementing either of our proposed customs arrangements will require investment in new systems and customs officers by HMRC.” Read more:

My news story for Tax Analysts, November 1 ($)

Politics make significant UK tax rises unlikely, think tank says

Chancellor of the Exchequer Philip Hammond has been “dealt a very tricky hand” and faces a choice between maintaining his commitment to getting the UK’s public finances into a surplus by the mid-2020s and responding to pressure for increased public spending, according to the Institute for Fiscal Studies.

“It is hard to see how the chancellor can both maintain the credibility of his fiscal targets and respond effectively to the growing demands for spending,” the IFS said in an October 30 release. Hammond will present his autumn budget on November 22, setting out the government’s plans for the economy, which will be based on updated forecasts from the independent Office for Budget Responsibility.

My news story for Tax Analysts, October 31 ($)

UK tax gap update highlights evasion, legal interpretation losses

A shift in the public debate is needed to ensure that everybody sees tax evasion as unacceptable, a leading UK tax expert said after official figures suggested that avoidance accounted for £1.7bn of a £34bn tax gap.

HM Revenue & Customs estimated that evasion, criminal attacks, and the hidden economy together accounted for £13.8bn, and error and non-payment for £6.4bn. Losses arising from differences in interpretation of the law accounted for £6bn, and failure to take reasonable care accounted for £6.1bn …

My news story for Tax Analysts, October 30 ($)

HMRC: Measuring tax gaps

HMRC can’t guarantee Brexit-ready customs service, Thompson says

HM Revenue & Customs will review its priorities early next year and may need up to 5,000 additional staff to secure successful delivery of a new customs service if the UK leaves the European Union without a customs agreement, according to HMRC Chief Executive and Permanent Secretary Jon Thompson.

Announcing on October 12 an inquiry into Brexit and the future of customs, the House of Commons Public Accounts Committee noted that HMRC was due to complete a five-year program for a new customs declaration service (CDS) by early 2017. Delays have meant that the CDS will not be fully operational until January 2019. Significant work is still required to meet the revised target, a National Audit Office report found in July …

My news story for Tax Analysts, October 30 ($)

Public accounts committee, oral evidence: Brexit and the Future of Customs

Consistent application of UK law under threat, Lords committee says

Experts have warned that the complexity of U.K. tax law poses a threat to lawyers’ and judges’ ability to apply it consistently, a House of Lords committee reported, a day after a government minister praised lawmakers’ rapid progress in examining the current, 665-page finance bill.

Experts have warned that the complexity of UK tax law poses a threat to lawyers’ and judges’ ability to apply it consistently, a House of Lords committee reported, a day after a government minister praised lawmakers’ rapid progress in examining the current, 665-page finance bill. The House of Lords Constitution Committee called for changes to the way legislation is developed to enable thorough parliamentary scrutiny and improve the quality of law. Legislation should be made more accessible and easier to understand for both practitioners and the public, the committee said in an October 25 release …

… Members of a public bill committee “rocketed through” the current finance bill efficiently and “in near-record time,” Financial Secretary to the Treasury Mel Stride remarked as the committee completed its examination of the bill ahead of schedule on October 24. Read more:

My news story for Tax Analysts, October 27 (paywall)

Preparing better legislation: Lords call for changes to law-making

Brexit bill ‘unclear in scope and effect,’ UK tax body says

The “abuse of rights” principle against artificial VAT avoidance could be removed retrospectively by the UK’s Brexit bill as currently drafted, and the apparent error illustrates how the bill goes “beyond what seems necessary” to leave the European Union, according to the Chartered Institute of Taxation.

“The government has been clear that its intention is to provide legal continuity during Brexit by copying over the entire body of EU law onto the UK’s post-exit statute book. This is a sensible aim,” said Jeremy Woolf, chair of the CIOT’s EU and human rights subcommittee, in an October 25 release. “However, as currently drafted, it appears to us that this will not be the case …” Read more:

My news story for Tax Analysts, October 26 (paywall)

UK campaign group urges greater international cooperation on corporate taxes

While the UK government continued to defend reductions in the corporate tax rate, a new campaign group called on ministers to champion the role of tax in building a civilised and fair society and to stop trying to compete for investment through “tax cuts and giveaways.”

Tax Justice UK aims to fill a “void in the debate around tax” in the UK. The November 22 budget should include steps toward “taxing the new economy” and resourcing and refocusing HM Revenue & Customs, it said in an October 25 release. The group was launched in May as a sister organisation to the Tax Justice Network but is independent of it, according to its website. Read more:

My news story for Tax Analysts, October 26 (paywall)