THE UK HM Revenue and customs has issued a Consultation Document on
Lifting the Lid on Tax Avoidance Schemes.
Tax
avoidance represents nearly 14% of the UK tax gap. It involves using the tax law
to gain an advantage that Parliament never intended and frequently involves
contrived, artificial transactions that serve little or no purpose other than to
reduce tax liability. And it enables some taxpayers to gain an unfair advantage,
undermining confidence in the tax system.
In
March 2011, the Government introduced a new HMRC anti-avoidance strategy in the
document Tackling tax avoidance. The strategy focuses on three core
strands:
1.
Preventing avoidance at the outset where possible;
2.
Detecting it early where it persists; and
3.
Countering it effectively through challenge by HMRC.
The
Government has taken robust measures to tackle tax avoidance; e.g. announcing
legislation that, in effect, has closed schemes down with immediate (and in one
exceptional case, retrospective) effect. The Government is currently consulting
on a General Anti-Abuse Rule ('GAAR') that is targeted at
artificial and abusive tax avoidance schemes. The GAAR is expected to act as a
deterrent to those engaging in such schemes in the first place; and where
avoidance persists, it will provide an additional tool to enable HMRC to
challenge and defeat these.
More
robust legislation has led to both a reduction in the quantity and ‘quality' of
avoidance schemes being marketed. Fewer schemes are now being sold and more are
being challenged operationally, rather than through a change in the law, because
it is clear that they do not work and simply do not deliver the tax advantages
advertised by those who promote them.
(See Full
Text)
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