Tax avoidance and evasion

Avoidance by multinational companies

From 1 April 2015 a new diverted profits tax, at a rate of 25%, will be introduced to counter the use of aggressive tax planning to avoid the payment of UK tax by multinational companies.

The government will also introduce legislation to enable it to implement the Organisation for Economic Co-operation and Development (OECD) model for country-by-country reporting.

Incorporation

For acquisitions made on or after 3 December 2014, the corporation tax relief a company may obtain for the acquisition of the reputation and customer relationships associated with a business (‘goodwill’) will be restricted when the business is acquired from a related individual or partnership.

Personal tax avoidance

As usual, the Chancellor announced a further raft of anti-avoidance measures:

• From 6 April 2015 legislation will remove the tax advantage provided by special purpose share schemes, commonly known as ‘B share schemes’. All returns made to shareholders through such a scheme will be taxed as dividends.
• Following consultation, legislation will be introduced on enhanced civil penalties for offshore tax evasion. The changes will mainly come into effect from April 2016.
• The disclosure of tax avoidance schemes (DOTAS) regime will be strengthened with updating of the existing scheme hallmarks, adding new hallmarks and removing ‘grandfathering’ provisions for the future use of schemes that were originally excluded.
• There will be consultation on a variety of avoidance topics, including deterrents for serial users of avoidance schemes, the use of overarching contracts of employment (such as ‘umbrella companies’) and penalties for general anti-abuse rule (GAAR) cases.