The government has renewed its focus on tax avoidance by pushing ahead with a consultation that aims to clamp down on promoters of these schemes.
The tax office is consulting on several measures that will allow HMRC to protect its position and minimise the tax gap.
The measures include the ability to secure or freeze a promoter’s assets so that the penalties they are liable to are paid, and powers to close down companies that promote avoidance schemes.
This will include the ability to penalise the onshore entity of an offshore promoter. The government is also hoping to be able to disqualify directors of such promoters at earlier opportunities.
It is estimated £1.7bn was lost to tax avoidance from 2018 to 2019.
HMRC said it hopes to support taxpayers to better identify and exit tax avoidance schemes earlier by providing better information around these.
The proposals build on measures announced in the 2020 Budget and will be legislated for in the Finance Bill 2021. The consultation will close on June 1, 2021.
Since the budget the government has come under added pressure to crack down on promoters of tax avoidance.
MP Jesse Norman, financial secretary to the Treasury, said: “At present the tax gap stands at a record low of 4.7 per cent but there is scope to reduce it still further, for example by removing sources of error, and by more work to tackle tax avoidance, evasion and other forms of non-compliance.
“To achieve these goals, the 10-year strategy outlined a series of reforms. The measures set out here will shape the next steps in delivering this strategy and include a range of policy announcements and updates which will support wider improvements in the tax system.”
Despite a record low tax gap, reports of tax evasion jumped 10 per cent in 2020. Last year, HMRC received 73,000 tax evasion reports.
The government is also targeting disguised remuneration tax avoidance. Such schemes disguise salaries as non-taxable payments such as loans.
At this stage, the government is not preparing specific reforms for the pursuit of disguised remuneration tax avoidance schemes and is instead gaining input on this area.
These schemes also use non-taxable routes by operating via offshore trusts or being based in low or no tax jurisdictions with the sole purpose of avoiding income tax or NICs.
HMRC has previously pursued such schemes in court but, with 45 being identified between April 2019 and May 2020 alone, it has decided to take a more comprehensive approach.
Tax evasion is also being targeted, and the government intends to publish draft legislation (for inclusion in the Finance Bill 2021) to further disincentivise the sale of illicit tobacco.
No safe havens
Elsewhere, the Treasury has published two discussion papers as part of its ‘no safe havens’ strategy which seeks to make taxpayers accountable for their UK tax obligations regardless of where income or gains are made.
These papers will assess how taxpayers can get offshore tax right, thus minimising mistaken non-payments, and the better ways for international tax debt to be prevented and collected.