Disclosure Rules Paying Off For UK Treasury

by Robert Lee, Tax-News.com, London

25 October 2005

The hardline stance being taken by Chancellor of the Exchequer Gordon Brown on the issue of tax avoidance appears to be paying off for the Treasury, which has recouped hundreds of millions of pounds in tax revenues within the last eighteen months as a result of tough tax planning disclosure rules, according to reports.

The controversial disclosure rules, introduced following the 2004 Budget, require accountants and tax planners to disclose to HM Customs & Revenue the details of new schemes that they intend to market to clients within five days of their implementation. This gives the tax man the opportunity to kill off any scheme deemed abusive or unacceptable at an early stage, without resorting to complex and lengthy legislative procedures.

So far, around 550 schemes relating to direct tax have been submitted to HMRC under these disclosure rules. In addition, a further 750 schemes relating to Value Added Tax and 200 schemes concerning stamp duty have also been referred to the tax authorities.

While exact figures on the amount of tax revenue the Treasury has recouped as a result of the disclosure rules are unavailable, reports suggest a figure of £500 million since their introduction.

The government's tough stance on tax avoidance is unlikely to soften, with the remuneration of highly-paid city bankers and executives the tax man's latest target. HMRC has reportedly given City firms until December to repay hundreds of millions in tax which, it is alleged, is owed on bonuses paid to top performing bankers using employee benefit trusts (EBTs) earlier in the year.

The tax authorities have long frowned upon the use of EBTs by City firms, which they regard as a means of avoiding National Insurance contributions. According to a report in The Observer, several city firms have been given until December 9 to either make NI payments on £1.5 billion in bonuses, or to appeal the demand.

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