Your IndustryMar 27 2014

Crackdown on tax avoidance and personal tax

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

George Osborne said his government has driven the international efforts to develop tough, new global tax rules that stop rich individuals hiding their tax and companies shifting their profits offshore.

In the UK, Mr Osborne said HM Revenue & Customs is collecting twice as much as before through compliance and the number of registered tax avoidance schemes has fallen by half.

The most significant change at this year’s Budget was the anticipated move to make alleged avoiders subject to prosecution by HMRC pay their tax upfront - and the controversial clarification that this will apply to everyone, including those covered by the new General Anti-Abuse Rule.

The money will be held in a separate account and repaid with interest in the event that the individual wins their appeal against HMRC’s decision. HMRC is successful in around 85 per cent of presecuted cases.

Mr Osborne said: “While the vast majority of wealthy people pay their taxes, there is still a small minority who do not.

“We will now require those who have signed up to disclosed tax avoidance schemes to pay their taxes, like everyone else, up front. “This will apply in future to schemes covered by our General Anti-Abuse Rule too.

“If people feel they’ve been wronged, they can of course go to court. If they win, they get their money back with interest.

“We have already consulted on this idea – now we will implement it. The OBR confirm that this will bring forward £4bn of tax receipts. And it will fundamentally reduce the incentive to engage in tax avoidance in the future.

“The public tolerance for those who do not pay their fair share evaporated long ago – but we’ve had to wait for this government before there was proper action.”

Mr Osborne also revealed in his Budget speech that he is increasing HMRC’s budget to tackle non-compliance. Transfers of profits between companies within groups to avoid tax will be banned, he added.

Tax credit debt recovery rates will be increased for those with sufficient earnings, Mr Osborne said.

HMRC was also handed modern powers to collect debts from bank accounts of people who can afford to pay but have repeatedly refused to.

Compliance checks to catch migrants who claim benefits they aren’t entitled to, saving the taxpayer almost £100m, have also been promised. Action to curb potential misuse of the EIS and VCT schemes was also pledged.

Personal tax allowances

On personal tax allowances, the chancellor said next year there will be no income tax at all on the first £10,500 of your salary. This translates to £800 less in tax every year for the typical taxpayer, George Osborne added.

The higher rate threshold will increase for the first time this parliament, from £41,450 to £41,865 next month, and then by a further 1 per cent to £42,285 next year.

People earning up to £100,000 will be paying less income tax because of this Budget, according to Mr Osborne.

The rate of the transferable tax allowance for married couples will also be linked to the personal allowance, so it will also increase to £10,500.