Submitted by Sestini & Co
| on Thu, 12/05/2013 - 17:52 | In Uncategorized
The policy notes list some 13 new measures aimed at clamping down on “unacceptable tax avoidance” and tax evasion. I find this interesting as having spent so much time on the long-awaited, much heralded General Anti-Abuse Rule (GAAR) the government presumably don’t think this is sufficient to prevent certain arrangements so specific legislation is needed. More attention than usual at this stage has been spent on adminstrative matters such as the collection mechanism and thought has been given to how to access and effectively use information gained from exchange agreements.
Some of the specific points close to my heart are as follows:
- Dual contracts: the government will legislate against the artificial division of one employment between the UK and overseas. From April 2014, UK tax will be levied on the full employnent income where a comparable level of tax is not payable overseas on the overseas contract. The treasury notes state that this is aimed at a small number of high-earning non-domiciled individuals. What the notes do not mention is that a number of large businesses have operated dual contracts under a system effectively licensed (and therefore one assumes supported) by HMRC for a number of years. Will these licenses simply be void after April 2014, or will they be exempt from this legislation? It will also be interesting to see the basis on which taxpayers with a genuine commercial need for separate contracts will be able to demonstrate this.
- Company car tax: to protect tax revenues, with effect from 6 April 2014, legislation will ensure individuals make payments for private use of a company car or van in the relevant tax year: presumably this is in part aimed at small companies where the directors may on occasion make their private use contributions via adjustments to their directors’ loan accounts without any cash changing hands, or reconcile their position and repay the company after the fact.
- Action has also been announced to prevent employers and employment intermediaries from avoiding employer NICs: the policy documents state that this is specifically aimed at those aiming to disguise employment as self-employment by using contrived contracts to disguise the employment of workers. So presumably this is not designed to be another IR35-style attack on contractors… In fact, the government specifically say they wish the system to support those taking the additional risks of self employment.
- Partnerships review: this is primarily aimed at “mixed” partnerships where the partner group consists of both individuals and companies, particularly those where income is disproportionately funnelled towards the corporate partner(s) and losses towards the individual partners. It will be interesting to see how this impacts professional partnerships who often have a management or service company as part of the structure as well as others (particularly traditional partnerships rather than LLP’s) who need a corporate partner for commercial reasons including limitation of liability.
Those who know me will be aware of my belief in every individual’s right to use the tax allowances and reliefs available to them, provided this is done in a sensible, commercial, sustainable way. hope that none of the new legislation forces businesses away from sensible commercial practice through fear of falling foul of the new rules. After all, to quote the GAAR – surely HMRC cannot prevent taxpayers from taking what can “reasonably be regarded as a reasonable course of action”.
If you’d like to discuss any of the above or any other tax matter, do contact us on firstname.lastname@example.org or on 01761 241 861.