Brown to extend net of tax avoidance

Gordon Brown is to extend his pursuit of tax evaders so more business advisors will fall under the shadow of disclosure requirements for abusive tax relief schemes.

He will use the Pre-Budget Report on Thursday to seal the fate of a large number of firms and organisations by closing a loophole that many experts have found easy to exploit.

After just six months of avoidance laws, it is understood the Chancellor is frustrated because companies use tax savvy methods to avoid reporting in-house or external relief schemes.

At the heart of his concerns, is evidence that advisors often prepare clients to engage tax schemes during the five-day period, between their launch and the time the Revenue expects to be notified.

One such scheme, reported by the Financial Times, openly flogs the five-day window and lets employers give staff tax-free remuneration instead of normal PAYE.

Amounts of related tax arising from any payment are then typically written off, by the time the scheme is closed.

A second area expected for clampdown is the wide and aggressive marketing of financial programmes, put into place before avoidance regulations were introduced.

Such schemes are expected to be hit for their boast to boost VAT recovery through phone calls, lessen NI contributions or even provide tax relief of 200 per cent on purchasing equipment.

Tax experts at the Institute of Chartered Accountants of England and Wales estimate that at least 400 existing programmes have already gone before the Revenue, since the Disclosure of Tax Avoidance came in.

They separately said any PBR unveiling in the shape of concrete proposals on reforming corporation tax is "unlikely."

They added the Inland Revenue has pledged to modernize the corporation tax regime, through a publication due to appear towards the end of this year.

Meanwhile, PKF Accountancy agreed that anti-avoidance measures instead of tax reform were at the top of the Chancellor’s PBR list.

"The anti-avoidance rules introduced in the Finance Act 2003 that are aimed at stopping the manipulation of share prices to reward employees with shares or options have inhibited the formation of technology transfer companies, exploiting university research.

"The Chancellor has now promised to address this issue and it is likely that a number of amendments will be announced to put right such problems."

 

30th November 2004

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