A package of measures to tackle tax abuse and raise £2.1bn by 2023 to 2024 has been announced by the government.
Announced in the Budget today (October 29), chancellor of the exchequer Philip Hammond said the measures revealed how the government plans to tackle tax avoidance, evasion and unfair outcomes.
In total, the government aims to raise £2.1bn by 2023-24.
In his speech, Mr Hammond said he wanted a tax system that "remains fair and robust against abuse” because “ending austerity was about leaving more of people’s hard earned money in their pockets”.
He added: “The UK’s tax system too must evolve, develop and digitalise.”
The chancellor pointed to an improvement in the overall tax gap – the difference between the tax that should be paid and the tax actually paid – which has fallen from 7.3 per cent in 2005 to 2006 to 5.7 per cent in 2016 to 2017. This is the lowest tax gap in five years, and the second lowest ever on record.
Of the 21 measures outlined to tackle tax abuse, 12 protect revenue and nine result in more tax coming to the exchequer by tackling fraud, avoidance and unfair outcomes and clamping down on non-compliance both offshore and domestically.
Of the £2.1bn, the government aims to raise over half (£1.3bn) by clamping down on VAT.
Some £515m is to be raised by ensuring that the correct VAT is paid to HM Revenue and Customs when the price of a good or service changes, which is to come into force as of September 1 2019.
Also, it aims to raise a further £240m by tightening the guidance for VAT groups as of 1 April 2019, and £425m by ensuring that VAT is paid to HMRC – even when a good or service is paid for by the consumer but not taken up – to come into force on 1 March 2019.
Finally, some £120m is to be raised by tackling the use of profit fragmentation: targeted legislation that prevents UK traders and professionals from avoiding tax by arranging for their taxable business profits to arise in territories where significantly lower tax is paid than in the UK.
The taxable UK profits will be increased to the actual, commercial level, and this will come into force on 1 April 2019.
Kate Ison, partner and corporate tax expert at law firm Bryan Cave Leighton Paisner, said: "The chancellor has confirmed that tackling tax evasion and tax avoidance remains high on the government's agenda. HMRC will continue to take an aggressive approach towards challenging tax avoidance and non-compliance as a way of reducing the tax gap.
"With the aim of raising an extra £2bn revenue by clamping down on non-compliance, and more investment to achieve this, we can expect HMRC to initiate more investigations into large businesses."