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Evasion, Avoidance and Debt Recovery

The main announcements for all evasion, avoidance and debt recovery, are shown below. More details can be found in the Overview of Tax Legislation and Rates (OOTLAR) (PDF 1.3MB) document.

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Main Announcements

  1. Levelling the tax playing field - compliance progress report March 2013
  2. No safe havens - HMRC offshore evasion strategy
  3. Loss buying: 'targeted loss buying' rules
  4. Loss buying: 'loss loophole closure' rules
  5. Close company loans to participators
  6. Corporation tax deductions for employee share acquisitions
  7. Stamp Duty Land Tax (SDLT) avoidance
  8. General anti-abuse rule (GAAR)
  9. Trade and property business deductions
  10. Tax and Procurement
  11. Tax Agreements with Isle of Man, Jersey and Guernsey
  12. Partnerships
  13. High-risk promoters
  14. Offshore employment intermediaries
  15. Debt Recovery

1. Levelling the tax playing field - compliance progress report March 2013

This report highlights the successes HMRC has had in tackling avoidance, evasion, criminal attack and debt since 2010.

Levelling the tax playing field - HMRC Compliance Strategy (PDF 1MB)

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2. No safe havens - HMRC offshore evasion Strategy

HMRC has published its offshore evasion strategy 'No safe havens'. This strategy sets out a coherent and coordinated framework for HMRC's approach to tackling offshore evasion. More information about specific Tax Agreements with Isle of Man, Jersey and Guernsey can be found at item 11 below.

No Safe Havens - HMRC Offshore Evasion Strategy (Opens new window)
Replaced on 21 March 2013 with this version which includes a change to remove an inaccuracy in the diagrams and images.

An update to the “No safe havens” strategy was published on 14 April 2014. For further details see No safe havens 2014 (Opens new widow)

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3. Loss buying: 'targeted loss buying' rules

Legislation will be introduced in Finance Bill 2013 to prevent 'loss buying', where companies pass the potential to gain access to corporation tax relief to unconnected third parties. The legislation will:

  • extend the current 'loss buying' rules, in Part 14 of Corporation Tax Act 2010 (CTA 2010), to apply to a transfer of ownership of company that is not a trading company nor one with a property or investment business, which holds non trading loan relationship deficits and non trading intangible fixed asset debits and credits;
  • amend the rules in Part 14 of CTA 2010 to additionally apply to the trade of a company that has undergone a change of ownership, if that trade or part trade is subsequently transferred to a fellow group company; and,
  • amend the rules at Part 5 of CTA 2010 to include controlled foreign company apportionments in the calculation of certain amounts to be surrendered as group relief.

These changes have effect from 20 March 2013.

Corporation Tax - 'Targeted Loss Buying' Rules - Technical note (PDF 72K)

Corporation tax loss relief: anti-avoidance (PDF 40K)

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4. Loss buying: 'loss loophole closure' rules

Legislation will also be introduced to address arrangements which seek to circumvent the longstanding loss buying rules in Part 14 of CTA 2010. In particular the rules will cover reliefs, deductions, allowances and expenses for which it is possible to dictate or predict in advance the timing of their 'crystallisation' since, where timing can be dictated or predicted, ownership or part ownership changes can take place in advance of the crystallisation of the loss enabling the current anti-'loss buying' rules in Part 14 of CTA 2010 to be bypassed.

The Government therefore proposes, in certain circumstances, to bring the tax treatment of unrealised loss, involved in a transfer between unconnected parties, more closely into line with the longstanding treatment of realised losses. The proposed changes will introduce three separate rules to combat 'loss buying' which, when triggered, will not remove the ability to relieve relevant losses but merely stop their set-off against other profits (including by way of group relief).

This will also have effect from 20 March 2013.

Corporation Tax - 'loss loophole closure' rules - Technical note (PDF 70K)

Corporation tax loss relief: anti-avoidance (PDF 40K)

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5. Close company loans to participators

Legislation will be introduced in Finance Bill 2013 to close three loopholes used to attempt to avoid the tax charge on close company loans to their participators. The changes will:

  • charge close companies on loans they make via intermediaries to their participators;
  • charge close companies on other payments they make via intermediaries to their participators; and,
  • update the repayment rules with an anti-avoidance provision.

These changes will have effect for loans, payments, repayments and repayment arrangements made on or after 20 March 2013.

Close Company Loans to Participators (Loophole Closures) - Technical Note (PDF 69K)

Loans from close companies to their participators (PDF 48K)

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6. Corporation tax deductions for employee share acquisitions

Legislation will be introduced in Finance Bill 2013 to clarify the rules that determine the availability of corporation tax deductions in connection with share options or awards granted to employees.

This legislation will have effect from 20 March 2013 in relation to company accounting periods ending on or after that date.

Corporation Tax relief for employee share acquisitions etc - Draft legislation and Explanatory Note (PDF 51K)

Corporation tax deductions for employee share acquisitions (PDF 37K)

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7. Stamp Duty Land Tax (SDLT) avoidance

Legislation will be introduced in Finance Bill 2013 to put beyond doubt that certain SDLT avoidance schemes that abuse the transfer of rights rules do not work.

These changes will have retrospective effect to 21 March 2012.

Stamp duty land tax avoidance: retrospective changes to section 45 of the Finance Act 2003 - Guidance notes (PDF 67K)

Stamp duty land tax avoidance (PDF 47K)

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8. General anti-abuse rule (GAAR)

Legislation will be introduced in Finance Bill 2013 for a GAAR to counteract tax advantages arising from abusive tax avoidance schemes. The GAAR will apply to income tax, corporation tax (and amounts treated as corporation tax), CGT, inheritance tax, SDLT, the annual tax on enveloped dwellings and petroleum revenue tax.

General anti-abuse rule (GAAR) (PDF 47K)

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9. Trade and property business deductions

As announced on 21 December 2012, the Government will introduce targeted anti-avoidance rules (TAARs) to the income tax and corporation tax provisions governing the relationship between the rules prohibiting and allowing deductions, with effect from that date. Legislation will be in Finance Bill 2013.

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10. Tax and Procurement

Following the consultation announced at Autumn Statement 2012, the Government has confirmed that from 1 April 2013 suppliers to central government will have to certify tax compliance when bidding for Government contracts. The responses to the consultation are published today.

Tax and Procurement - Summary of Consultation Responses (PDF 70K)

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11. Tax Agreements with Isle of Man, Jersey and Guernsey

The UK has agreed a comprehensive package of measures with the Isle of Man, Guernsey and Jersey governments to clamp down on those who choose to hide their money offshore. This demonstrates the commitment of all parties to tackle tax evasion.

The package consists of:

  • agreement to automatically exchange a wide range of financial information on UK taxpayers with accounts in the Isle of Man, Guernsey and Jersey which will significantly enhance HMRC's ability to crack down on those who do not declare their offshore affairs;
  • a disclosure facility to allow people to come forward to disclose their previous tax affairs in advance of the information being automatically exchanged.

HMRC has signed Memoranda of Understanding with each of the Crown Dependencies.

Memorandum of Understanding between HMRC and the Isle of Man (PDF 641K)

Memorandum of Understanding between HMRC and Guernsey (PDF 613K)
Replaced on 21 March 2013 with this version which is an exact copy of the signed and dated agreement.

Memorandum of Understanding between HMRC and Jersey (PDF 417K)
Replaced on 21 March 2013 with this version which is an exact copy of the signed and dated agreement.

HMRC has also published its offshore evasion strategy 'No safe havens'. This strategy sets out a coherent and coordinated framework for HMRC's approach to tackling offshore evasion.

No Safe Havens - HMRC Offshore Evasion Strategy (PDF 3.27MB)
Replaced on 21 March 2013 with this version which includes a change to remove an inaccuracy in the diagrams and images.

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12. Partnerships

The misuse of the partnership rules has been a feature of many avoidance schemes closed down in recent years. The Government announced in Autumn Statement 2012 that it would consider whether partnerships should be reviewed, as part of the rolling examination of high risk areas of the tax code. The Government has now announced that it will consult on measures to:

  • remove the presumption of self-employment for limited liability partnership (LLP) partners, to tackle the disguising of employment relationships through LLPs; and,
  • counter the manipulation of profit/loss allocations (by both LLPs and other partnerships) to secure tax advantages.

A consultation document will be published with proposals to address both issues in the spring, with legislation to be introduced in Finance Bill 2014.

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13. High-risk promoters

The Government will consult this summer on a package of information powers, penalties and other measures for tackling the behaviour of high-risk promoters of tax avoidance schemes, with a view to bringing forward legislation in Finance Bill 2014.

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14. Offshore employment intermediaries

The Government will consult on strengthening obligations to ensure the correct income tax and NICs are paid by offshore employment intermediaries, with a view to legislating in Finance Bill 2014. This is a result of the review announced in Autumn Statement 2012.

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15. Debt Recovery

A package of measures has been announced and more information will be published later in the year.

Debt - Improving coding out

The Government will consult on improving its collection of tax debts through the PAYE system (coding out), to make the process fairer and more equitable. This will include increasing the size of debts that can be recovered through coding out from those with higher incomes. Changes will be made through secondary legislation in due course.

Debt - Increasing the use of charging orders

HMRC will increase the use of Charging Orders, used to secure a tax debt against a debtor's assets.

Debt - Better data

HMRC will improve its ability to target resources in collecting tax debt by making new connections between the Department's datasets.

Debt - Automated telephony

HMRC will update its telephone system to allow tax debts to be paid via an automated process.

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