[ARCHIVED CONTENT] Press: 2004-29

DOWNING STREET MEETING DISCUSSES REVENUE-CUSTOMS INTEGRATION AND ANTI-AVOIDANCE

Treasury Permanent Secretary Gus O’Donnell today held a meeting in 11 Downing Street with business representatives, and the accountancy and legal professions involved in work on tax.

The meeting was an opportunity to explain and discuss the outcome of Mr O’Donnell’s review of the revenue departments, and to set out further details of the Chancellor’s proposals for greater transparency in the market for tax avoidance schemes and arrangements, and of the steps which will be taken to prevent forestalling of the new regime.

The meeting was constructive, and focused on the importance of on-going dialogue between the Treasury, Inland Revenue, and HM Customs and Excise, and representatives of business and the professions.

Notes to Editors

Gus O’Donnell’s review of the revenue departments, Financing Britain’s Future , was published alongside yesterday’s Budget.

Details of the proposed new requirements for the disclosure of tax avoidance schemes was set out in the Budget (paragraph 5.84), and in Budget Notices REVBN28 and CEBN01.

At the meeting, officials set out details for the implementation of the proposed rules covering direct taxes, which will:

be targeted to catch avoidance schemes and arrangements based on financial or employment-based products;

also target taxpayers that devise and use their own schemes;

be backed by an initial penalty of up to £5000 for non-disclosure by promoters of notifiable schemes, subject to appeal. Continued failure to disclose will attract a further penalty of £600 a day; and

contain transitional provisions to discourage forestalling against the disclosure rules, with a requirement from the date the legislation takes effect to disclose notifiable schemes or arrangements which they have promoted or sold from today. Users of notifiable schemes or arrangements who will have to make a disclosure in place of a promoter (for example, if the scheme was purchased from offshore), would be required to do so for schemes of arrangements dated from 23 April in relation to schemes they have implemented.

The legislation would allow Customs to introduce parallel arrangements for the disclosure of avoidance schemes involving VAT, reflecting the different legal context for VAT law. Officials confirmed that, under the new rules:

businesses with an annual turnover of £600,000 or more will be required to notify Customs where it uses specific VAT avoidance schemes, which will be published in a statutory list. Failure to disclose a listed scheme will incur a penalty of 15% of the tax at stake; and

there will also be a requirement for larger businesses, with annual turnover of £10 million or more, to disclose the use of schemes that meet certain criteria, designed to target the most abusive schemes. Failure to disclose qualifying schemes will incur a flat rate penalty of £5,000. Non-disclosure penalties will include scope for appeal.

Full details of the direct tax and VAT measures will be available with the publication of the Finance Bill.

Media enquiries should be addressed to the Treasury Press Office on
020 7270 5238.