2013 Budget: key private client tax announcements | Practical Law
The Chancellor, George Osborne, delivered his Budget on 20 March 2013. This update summarises the most important private client tax announcements. (Free access.)
The Chancellor, George Osborne, delivered his Budget on 20 March 2013. This update summarises the most important private client tax announcements. (Free access.)
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References to "Overview" are to the HMRC/HM Treasury Overview of Tax Legislation and Rates published on 20 March 2013; references to "Budget Report" are to the HM Treasury 'Budget 2013' document; and references to "TIIN" are to HMRC/HM Treasury Tax Information and Impact Notes published on 20 March 2013. We link throughout this update to the Overview document and the Budget Report, with references to the specific paragraphs relating to the measure reported on.
The Overview included a section (at paragraph 1.69) on 'measures unchanged following consultation', indicating that the measures listed would be introduced in Finance Bill 2013 with no changes made to the drafts following consultation (except for small, technical amendments to some measures). Where appropriate, we have included a section at the end of each topic to confirm where measures that we are tracking were listed in this paragraph.
Lifetime planning
IHT nil rate band frozen until 2018
Legislation to extend the freeze on the inheritance tax nil rate band of £325,000 for a further three years from 2015-16 up to and including 2017-18. The legislation (to be introduced in Finance Bill 2014, according to the Overview) will have effect from the tax year 2015-16.
Inheritance tax: limiting deduction for liabilities
HMRC has announced that conditions and restrictions will be introduced in Finance Bill 2013 to limit the deduction of liabilities from a person's estate when calculating the value transferred on deaths and chargeable lifetime transfers occurring after Royal Assent. This measure is targeted at schemes creating artificial liabilities where the creditor is never repaid and loans to acquire assets that benefit from inheritance tax (IHT) reliefs (such as business property relief (BPR), agricultural property relief (APR) and woodlands relief) and property outside the scope of IHT (such as excluded property owned by non-UK domiciled individuals).
The measure will ensure that liabilities will only be deductible where the creditor is actually going to be repaid.
In most cases, loans made to acquire excluded property will no longer be allowed as a deduction. The deduction may be allowed where acquired property has been disposed of or where the liability is greater than the value of the excluded property so long as certain conditions are met.
Loans made to acquire BPR and APR assets will be treated as reducing the value of those assets so that the value of the reliefs will also be reduced. Where a liability exceeds the value of the relieved assets that excess will be allowed as a deduction against the estate as a whole although this will be subject to the restrictions to be introduced in relation to unpaid debts.
The new rules will also cover deductions for liabilities in relation to settled property although the restrictions on unpaid debts will not apply to the calculation of ten year charges.
Commercial debts and liabilities that are not repaid for a commercial reason will be unaffected.
Although this measure is targeted at specific schemes it could have a wider impact on vanilla IHT planning. For example, individuals wanting to liquidate corporate vehicles holding high value residential property in favour of direct ownership to avoid the extended scope of capital gains tax and the new annual fixed charge (ATED) have been considering the reduction of IHT exposure through associated debt. The proposed restrictions and conditions may make this harder.
The capital gains tax (CGT) annual exempt amount for 2013-14 will be £10,900, increased from £10,600 in 2012-13. This is the first time that an annual increase has been calculated using the consumer prices index (CPI). The government has already announced that the amounts for the following two tax years will be increased by 1% (to £11,000 in 2014-15 and £11,100 in 2015-16) (see Private client tax legislation tracker 2012-13: CGT: annual exempt amount for 2014-15 and 2015-16).
Personal income tax allowance reaches £10,000 in 2014-15
As anticipated, the Chancellor announced that the coalition government's plan to increase the personal allowance to £10,000 over the parliament will be accelerated. The personal allowance for those born after 5 April 1948 will increase (by £560) to £10,000 in 2014-15. At the same time, the basic rate limit will be reduced to £31,865, giving a higher rate threshold of £41,865. This figure reflects the increase of 1% in the higher rate threshold (tax-free amount plus basic rate band) that was announced in the 2012 Autumn Statement (see Legal update, 2012 Autumn Statement: business tax implications: Personal allowance increase to £9,440 from April 2013). For 2015-16, the personal allowance will increase in line with the Consumer Prices Index, while the higher rate threshold will increase by 1% to £42,285.
The Budget also confirms the rise in the personal income tax threshold from £8,105 to £9,440 with effect from 6 April 2013, with the basic rate limit being reduced to £32,010 (giving a higher rate threshold of £41,450).
CGT: Disposals of high value residential property by non-natural persons
The draft legislation extending the charge to capital gains tax to resident and non-resident non-natural persons was published for consultation on 31 January 2013. The TIIN on this measure (together with details of amendments to the legislation on the related annual tax on enveloped dwellings (ATED) charge and 15% SDLT rate for high value residential property) does not indicate whether shortcomings in the draft legislation (specifically relating to the formula for calculating tapering relief for gains to prevent a cliff edge effect round the £2 million threshold and the anomalous measure on principal private residence relief for property owned by a trust) will be ironed out in the Finance Bill 2013 when it is published.
The TIIN gives details of reliefs that will apply to the charge to CGT as well as the related SDLT and ATED charges. As the draft CGT legislation is structured to bring into charge only non-natural persons that are liable to the ATED, presumably the changes to the relief provisions will be contained within the revised ATED provisions rather than the CGT legislation.
Seed enterprise investment scheme: extension to reinvestment relief
The government has announced an extension to seed enterprise investment scheme (SEIS) reinvestment relief.
Currently, SEIS reinvestment relief provides an exemption from capital gains tax (CGT) for gains on disposals of any assets made in 2012-13 if a SEIS qualifying investment is also made in 2012-13. (For further detail, see Practice note, Seed Enterprise Investment Scheme (SEIS): Capital gains tax reinvestment relief). Legislation will be introduced in the Finance Bill 2013 to extend the exemption to gains accruing in 2013-14 provided they are re-invested in SEIS qualifying shares in 2013-14 or 2014-15. However, the exempt amount is half the qualifying re-invested amount.
Seed enterprise investment scheme: concession for off-the-shelf companies
The government has announced that legislation will be introduced in the Finance Bill 2013 to amend the seed enterprise investment scheme (SEIS) independence requirement. The amendment will have effect for shares issued on or after 6 April 2013.
The independence requirement is that the issuing company must not be a 51% subsidiary of another company or under the control of another company (or another company together with persons connected with that other company) at any time from the date of its incorporation to the three year anniversary date of the relevant share issue (section 257DG(2), ITA 2007). (This contrasts with the Enterprise Investment Scheme rules that apply the independence requirement from the date of issue of shares.) The SEIS independence requirement causes a problem for off-the-shelf companies because it is common for a corporate shareholder to hold the subscriber share, which means, for a period, the off-the-shelf company is controlled by another company. The amendment will ensure that such off-the-shelf companies are not disqualified provided that control exists only during a period where the company has issued only subscriber shares and has not yet begun, or begun preparations for, its trade or business.
The Chancellor announced further details about the proposed new "employee shareholder" employment status, including:
The tax provisions relating to employee shareholder shares will take effect on 1 September 2013, along with the separate legislation introducing the new employment status.
A revision to the draft legislation providing a capital gains tax exemption for disposals of employee shareholder shares, to exclude an income tax charge on a buyback of CGT-exempt employee shareholder shares, and to strengthen the "material interest" restriction.
The government will provide £40 - 50 million annually from tax year 2014-15 to encourage uptake of employee ownership structures for businesses. This will fund:
A new capital gains tax relief on the sale of a controlling interest in a business to an employee ownership structure. This relief is related to the development of an "off the shelf" employee owned company model by the Department for Business, Innovation and Skills and the Implementation Group on Employee Ownership. The intention is to introduce legislation for the relief in the Finance Bill 2014.
The government will also consider further incentives in this area, including measures targeted at indirect employee ownership models.
As announced in the 2012 Budget, capital gains tax entrepreneurs' relief will be available on disposals of shares acquired on exercise of EMI options (EMI option shares) from 6 April 2013, regardless of whether the option holder holds 5% of the shares in the company (as is usually required). The holding period of an EMI option will count towards the one year holding period required for shares to qualify for entrepreneurs' relief, as specified in a draft clause for the Finance Bill 2013 published in December 2012 (see Legal update, Draft Finance Bill 2013: enterprise management incentives (EMI) options and entrepreneurs' relief). The draft legislation has been revised so that the relief will also be available on the same basis for shares that replace EMI option shares on a company reorganisation, and for certain shares following an exchange of EMI option shares for shares in another company. Legislation to amend entrepreneurs' relief as it applies to EMI option shares will be included in the Finance Bill 2013, which is expected to be published on 28 March 2013.
The Budget confirms that in addition to fixed protection 2014, a form of personalised protection will be made available that will give individuals who claim it their own personalised lifetime allowance and allow them to make further pension accruals. Draft legislation for the personalised protection regime will be published in spring 2013 and be enacted in the Finance Bill 2014.
The maximum withdrawal permitted under a capped drawdown arrangement will rise from 100% to 120% of value of an equivalent annuity for new drawdown years starting after 26 March 2013. Following consultation, the legislation is to be amended to remove the requirement that the maximum drawdown pension should be recalculated after a pensioner with fixed protection transfers to another scheme.
The Budget Report also reveals the Treasury has commissioned a review of drawdown rates by the Government Actuary's Department, including the assumptions used, to ensure they reflect the annuity market.
As previously announced, the Finance Bill 2013 will include a number of reliefs which reduce the SDLT rate from 15% to 7% on acquisitions of high value residential property by non-natural persons. The reliefs will, broadly, match those where there is relief against the annual tax on enveloped dwellings (ATED). However, these SDLT reliefs will apply only if the property continues to satisfy the qualifying conditions throughout the following three years. Otherwise, clawback provisions will apply and additional SDLT will become payable.
The government has announced that the draft Finance Bill 2013 measures re-writing the transfer of rights relief in section 45 of the Finance Act 2003 (see Legal update, SDLT transfer of rights: draft Finance Bill 2013), which were not a model of clear drafting, have been revised to improve their clarity and structure as well as addressing certain technical deficiencies.
The government has announced that it will consult on the abolition of stamp duty on shares quoted on growth markets such as the Alternative Investment Market (AIM) and the ISDX Growth Market. Legislation will be contained in the Finance Bill 2014.
The government will introduce a £72,000 cap on reasonable care costs for older people from April 2016. The Secretary of State for Health, Jeremy Hunt, announced the government's intention to cap financial contributions towards the costs of care on 11 February 2013 and that the proposal would be funded in part by extending the freeze on the inheritance tax (IHT) nil rate band for a further three years from 2015-16. However, the cap announced at that time was £75,000 (see Legal update, IHT nil rate band freeze extended to pay for social care proposals). At the time of writing, it is not clear whether the cap has been lowered or there is an error in the 2013 Budget announcement and the TIIN outlining the freeze on the IHT nil rate band.
Interest relief on loans to purchase life annuities
The government will consult on the impact of withdrawing relief for interest on loans to purchase life annuities. Any legislation would be introduced in the Finance Bill 2014 and withdraw the relief for interest paid from 6 April 2019 or another future date.
This relief is a relic of mortgage interest at source (MIRAS), which was abolished in 1999. Grandfathering provisions currently allow relief on loans to purchase life annuities taken out before 9 March 1999 (sections 353 and 365, Income and Corporation Taxes Act 1988). The relief may apply to individuals who took out home income plans (a form of equity release) before that date. For more information, see Norfolk and Montagu on the Taxation of Interest and Debt Finance (Bloomsbury Professional, 2012), Chapter 8: Deduction of income tax from interest and information reporting: Mortgage interest relief at source (MIRAS) and Chapter 17: Life assurance for special purposes: B: Home Income Plans.
Draft secondary legislation was published on 31 January 2012 to implement an upper limit on the amount of premiums that a policyholder could pay into a qualifying policy. A consultation was published by HMRC on 15 June 2012 and closed on 6 September 2012. A summary of responses was subsequently published on 11 December 2012.
As expected, the Finance Bill 2013 will include legislation introducing a statutory residence test for individuals (SRT), placing HMRC's concessionary split-year treatment on a statutory footing, and amending and extending anti-avoidance rules that tax temporary non-residents. These measures will take effect from 6 April 2013. Following consultation on its second draft of the legislation (published on 11 December 2012), the government has made amendments to the SRT concepts of full-time work and international transportation workers, as well as to the new rules on split-year treatment, although we will need to wait for publication of the Finance Bill on 28 March 2013 to see the details.
The government is proceeding with its planned abolition of the concept of ordinary residence for tax purposes and the enactment of overseas workday relief (OWR). These measures will take effect from 6 April 2013. Following consultation on its second draft of the legislation (published on 11 December 2012), the government has amended the transitional rules for claiming OWR, although we will need to wait for publication of the Finance Bill on 28 March 2013 to see the details.
The draft legislation reforming the inheritance tax treatment of transfers between UK domiciled individuals and their non-UK domiciled spouses or civil partners is largely unchanged but the TIIN on the measures has been updated and replaces that published on 11 December 2012. From a comparison of both TIINs, the following appear to be amendments to the final legislation to be introduced in Finance Bill 2013:
Electing spouses making either a lifetime or death election will be able to choose a date from which the election applies, going back a maximum of seven years so that any lifetime transfers during that period are covered by the election. The earliest date that can be specified is 6 April 2013. Where no date is specified, a lifetime election will have effect on the date it is made and a death election will be treated as taking effect immediately before any transfer resulting on the death of a UK domiciled individual. In the absence of any published draft legislation setting out these amendments, the provisions where no date is specified appear to be the same as those in the original draft legislation published on 11 December 2012, but which related to all lifetime and death elections, respectively (see Legal update, IHT exemption for non-domiciled spouses: draft Finance Bill 2013 provisions: Effective elections).
Transfer of assets abroad and attribution of gains rules
The government has announced, but not published, changes to the draft Finance Bill 2013 legislation published on 11 December 2012 to amend anti-avoidance rules dealing with the transfer of assets abroad (Chapter 2, Part 13, Income Tax Act 2007) (TAA rules) and the attribution of chargeable gains realised by non-UK tax resident companies that are closely controlled by UK participators (section 13, Taxation of Chargeable Gains Act 1992) (section 13). The purpose of this legislation is to make both sets of rules compliant with EU law and clarify certain aspects of their operation.
The changes to the draft legislation amending the TAA rules are that:
The exemption for genuine transactions will allow HMRC to make an apportionment where part of a transaction is genuine and part not, so that only income attributable to the non-genuine part is chargeable to tax. This change will take effect with the exemption itself on 6 April 2012. (The last version of the draft legislation required an apportionment to be made but did not indicate how it should be done, so this seems to be an attempt to address this.)
The provisions to clarify the matching rules for benefits received by persons other than the person who transferred the assets abroad have been removed. There will be a further consultation on these provisions, which will now be postponed until the Finance Bill 2014.
The change to the draft legislation amending section 13 is that the new exemption for economically significant activities no longer requires activity to be carried on wholly outside the UK through a non-UK business establishment.
HMRC has published an amended TIIN on the TAA rules, replacing the TIIN published on 11 December 2012, but there is no new TIIN on section 13.
We will review the effect of the changes after the revised legislation is published in the draft Finance Bill on 28 March 2013. Without sight of the draft legislation it is not possible to assess whether it will now achieve EU compliance.
The Chancellor announced in his Budget statement that the UK had reached agreements with the Isle of Man (IOM), Jersey and Guernsey to bring in over £1 billion of unpaid taxes as part of a package of tax avoidance and evasion measures, which includes HMRC's offshore evasion strategy (see HMRC publishes offshore evasion strategy).
The Budget documents include the text of a memorandum of understanding (MOU) with each of Jersey and Guernsey setting out the terms of a disclosure facility to run from 6 April 2013 to 30 September 2016. The MOUs are unsigned and undated. The terms of these facilities appear to be identical to those agreed with the Isle of Man (IOM) and published on 19 February 2013, except for the range of capped penalties. In the IOM facility, penalties are capped at 10% except for penalties relating to inaccuracies in documents under Schedule 24 to the Finance Act 2007, which range from 20% to 40%. In the Jersey and Guernsey facilities, the higher penalties may also apply in relation to failure to notify chargeability to tax under Schedule 41 to the Finance Act 2008 and late filing of tax returns under Schedule 55 to the Finance Act 2009. We suspect that the omission of these provision from the IOM facility may be an oversight and so may be rectified (for example, in a joint declaration).
The government has not yet published the automatic tax information exchange agreements that will accompany the three disclosure facilities, which it has previously announced would be along the lines of the agreement between the UK and the US to implement the Foreign Accounts Tax Compliance Act (FATCA). According to an action plan at the end of the offshore evasion strategy, automatic information exchange with both the US and the Crown Dependencies will begin in 2015. However, the plan may be inaccurate, as it also shows that the disclosure facilities will run from mid-2014 to the end of 2016 rather than on the dates above (which are the same in all three facilities).
The Guernsey government had already confirmed that it would enter into a package of this kind with the UK, but Jersey had only confirmed that it was consulting its financial institutions about the proposal. That consultation ended on 15 March, so this announcement is earlier than might have been expected.
Finance Bill 2013 will contain primary legislation to implement international agreements to improve tax compliance. The government will also shortly issue regulations to implement the UK-US Foreign Account Tax Compliance Act (FATCA) agreement, signed on 12 September 2012 (see Legal update, UK and US sign agreement to implement FATCA). The government will publish an updated TIIN for (presumably) the primary legislation alongside the regulations. Further regulations will be introduced to implement subsequent similar automatic exchange agreements that the UK enters into.
The government has confirmed its announcement in the 2012 Budget that Statement of Practice (SP) 1/09 is to be enacted in the Finance Bill 2013 and will take effect from 6 April 2013.
An apportionment of earnings on a just and reasonable basis.
Simplified "mixed fund" rules that permit eligible employees to calculate their UK tax liability by reference to the total amount remitted to the UK from a nominated account rather than having to apply the complex remittance basis mixed fund ordering rules on a transaction-by-transaction basis.
Immediate change to the offshore funds regulations and further future amendments
Two statutory instruments will be introduced to amend the offshore funds regulations. The first, which takes effect from 3pm on 20 March 2013, clarifies that an offshore income gain cannot be avoided by a merger or reorganisation of the offshore fund. The second will introduce amendments ensuring that investors are taxed on the correct proportionate share of income of an offshore fund. (In relation to the taxation of offshore funds, see Practice note, Offshore funds: tax: Offshore funds legislation.)
The original offshore funds legislation was introduced to prevent income being rolled up offshore and effectively converted into chargeable gains. The regime was reformed and new legislation, which took effect from 1 December 2009, was introduced. Under the new regime, investors in offshore funds which are reporting funds are subject to capital gains tax on a disposal of their interest in the fund and are subject to income tax on their share of the annual reported income of the fund. Investors in offshore funds which are non-reporting funds are subject to income tax on a disposal of their interest in the fund.
The Offshore Funds (Tax) (Amendment) Regulations 2013 (SI 2013/661), which came into force at 3pm on 20 March 2013, introduce a new paragraph 3A into regulation 17 of the Offshore Funds (Tax) Regulations 2009 (SI 2009/3001). This paragraph provides that an investor will be subject to income tax on a disposal of an interest in a reporting fund if that interest was acquired in consequence of an arrangement to which section 135 or 136 of the Taxation of Chargeable Gains Act 1992 applied and the interest which they held prior to the exchange of securities or scheme of reconstruction was in a non-reporting fund.
Further regulations, which will contain additional amendments, will be published for comment shortly after 20 March 2013 and are expected to come into force by 30 June 2013. These regulations will:
Correct the rules for calculating total reported income and the amount reported to individual investors so that mismatches do not occur.
Amend the regulations so that a fund operating "full equalisation" can offset capital returned on a new subscription against the first distribution made.
Amend the regulations to allow excess expenses of one computation period to be set against income of another computation period within the same reporting period.
Life insurance policies: time apportioned reductions
The government published draft legislation on 11 December 2012 to amend rules within the chargeable event gain regime that reflect a life insurance policyholder's period of residence outside the UK. It will apply to policies that are issued or modified on or after 6 April 2013.
The government published draft legislation on 11 December 2012 to provide that sums transferred to the UK in respect of levies under the UK/Switzerland tax co-operation agreement will not be treated as taxable remittances. This provision will apply retrospectively from 1 January 2013, when the agreement came into force.
The government has announced that, in spring 2013, it will publish a response to its July 2012 consultation on the simplification of inheritance tax charges in relevant property trusts. The response will cover detailed options for simplifying the way exit and ten year anniversary charges are calculated. Legislation to implement any changes will be included in Finance Bill 2014.
The initial consultation was criticised for its narrow scope. The response may take into account these views.
The government's Budget Report states, in very brief terms, that the Finance Bill 2013 will introduce legislation to "treat for tax purposes assets held in trusts for vulnerable beneficiaries in a similar way as if held directly by the vulnerable person". This seems likely to be a reference to the draft Finance Bill 2013 clauses, published on 11 December 2012 and revised on 17 January 2013, which change the definition of a disabled person for tax purposes and harmonise the restrictions on capital and income distributions from trusts for vulnerable persons (see Legal update, Vulnerable beneficiary trusts: HMRC response to consultation and Finance Bill 2013 clauses). Although not mentioned in any of the Budget materials, we understand that, before it appears in the Finance Bill 2013, the government will be amending the draft legislation on vulnerable beneficiary trusts to:
The government published draft legislation on 11 December 2012 to ease restrictions on hold-over relief for capital gains tax (CGT) in heritage maintenance funds when trustees distribute trust income to settlors of the funds. The provision will have effect retrospectively from 2012-13.
IHT: investments in OEICs and authorised unit trusts
The government published draft legislation on 11 December 2012 to provide that there will be no inheritance tax (IHT) charge when the trustees of a trust settled by a non-UK domiciled settlor switch UK assets to holdings in open-ended investment companies (OIECs) and authorised unit trusts. The measure will have retrospective effect from 16 October 2002.
The government has confirmed that decommissioning security settlements used in the oil and gas industry will be removed from the definition of relevant property in section 58(1) of the Inheritance Tax Act 1984, as announced on 11 December 2012.
Charity relief from annual residential property tax
The 2012 Budget announced that measures will be introduced in Finance Bill 2013 for an annual charge on residential properties valued at more than £2 million held by certain "non-natural persons".
Gift Aid: making it easier to claim on digital gifts
The government will consult on proposals to make it easier to claim Gift Aid on donations made using a wide range of digital giving channels (such as online or by using mobiles and tablets). The consultation will include options for enabling donors to complete a single Gift Aid declaration to cover all their donations through a specific channel. If primary legislation is required to affect policy changes resulting from the consultation, measures will be introduced in Finance Bill 2014.
On 24 January 2013, the government launched a consultation on proposals to reform payroll giving, see Legal update, Government consults on Payroll Giving scheme reforms. The consultation closes on 19 April 2013. The government has confirmed that it will take forward any necessary changes to the payroll giving scheme in a future finance bill, as appropriate.
From April 2014, an allowance of £2,000 per year will be introduced for all charities (and other businesses) to offset against their employer Class 1 National Insurance Contributions (NICs) bill. The government will engage with stakeholders on the implementation of the measure, with the aim of introducing legislation later in 2013.
The government has announced that, in order to encourage volunteers to run events, it will improve the quality of its guidance and publish it in a single document on www.gov.uk. The government has acknowledged that confusing guidance has previously deterred volunteers and obstructed events that are valuable to local communities.
The government has announced that it will consult by summer 2013 on the introduction of a new tax relief to encourage investment in social enterprises, with a view to introducing legislation in Finance Bill 2014.
VAT: charitable buildings withdrawn from energy-saving reduced rate
The government announced that measures to withdraw charitable buildings from the scope of the reduced rate of VAT for the supply and installation of energy-saving materials with effect from 1 August 2013 will be introduced in Finance Bill 2012 with no changes made to the final legislation following consultation, except small, technical amendments.
The government has confirmed that the Finance Bill 2013 will include legislation introducing a general anti-abuse rule (GAAR). The GAAR will counteract tax advantages arising from abusive avoidance schemes subject to certain procedural requirements. Specifically, counteraction must first be notified by a designated HMRC officer. Unless, having considered any representations made by the taxpayer, a designated HMRC officer then decides that counteraction ought not to apply, the arrangements must be referred to an Advisory Panel for its opinion. Counteraction will be on a just and reasonable basis.
The GAAR will apply to income tax, NICs, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty land tax and the new annual tax on enveloped dwellings (previously known as the annual residential property tax) due to be enacted in the Finance Bill 2013. The legislation will apply to abusive tax arrangements entered into on or after the date of Royal Assent to the Finance Bill 2013. Separate legislation will be introduced later in 2013 to apply the GAAR to NICs.
Following this, as part of the 2013 Budget, the government announced that it will consult in spring 2013 on measures to:
Remove the presumption of self-employment for partners in limited liability partnerships (LLPs) to combat the disguising of employment relationships through LLPs.
Counter the artificial allocation of profits or losses to partners in LLPs and other partnerships (including using a company, trust or similar vehicle) to secure a tax advantage.
The government aims to introduce legislation in this area in the Finance Bill 2014.
Disclosure of tax avoidance schemes (DOTAS): High-risk promoters
The government has confirmed that it will consult over summer 2013 on introducing a package of information and penalty powers specifically targeting the behaviour characteristic of high-risk promoters of tax avoidance schemes. The intention is to introduce legislation in the Finance Bill 2014. The measures could include publishing the details of such promoters.
Disclosure of tax avoidance schemes (DOTAS): Penalties: previously defeated schemes
The government has announced that it will consult on a proposal to introduce a penalties-based approach to taxpayers who have used avoidance schemes that have been defeated in court in litigation against another party. These taxpayers will be asked to acknowledge to HMRC that the judgment applies to them and amend their returns accordingly, or confirm that they stand by their original return. Penalties would be charged if the taxpayer failed to take reasonable care. The government intends that the measures will be included in the Finance Bill 2014.
HMRC has outlined its strategy for tackling offshore evasion in a document entitled No safe havens. The strategy has been developed by HMRC's new Offshore Evasion Strategy Team and its publication forms part of a package of measures originally announced in HMRC's 3 December 2012 report entitled Closing in on tax evasion (see Legal udpate, HM Treasury and HMRC outline approach to tackling tax evasion).
There are three main limbs to HMRC's strategy:
Taking action to reduce the opportunities for offshore tax evasion, including:
making it easier for taxpayers to understand their obligations;
providing simple ways for non-compliant taxpayers to put their tax affairs on the right footing and then helping them to remain compliant through a new support programme entitled Sustaining Offshore Voluntary Compliance;