UK Businesses Back Anti-Tax Avoidance Drive

by Jason Gorringe, Tax-News.com, London

27 September 2010

A survey by accounting and consultancy firm RSM Tenon has found resounding support for HM Revenue and Customs's stated intention to increase funding to tackle tax avoidance in the UK, with only 9% opposed to increasing funding in this area.

RSM Tenon’s Business Barometer found support not only for extra funding for HMRC tax compliance initiatives but also more than half (53%) of UK businesses agreed that reform was necessary to establish a simpler, more transparent tax system, with an eye to improving compliance with the tax code.

In addition, the survey found support from one quarter of respondents for the introduction of a general anti-avoidance rule (GAAR) to catch those who have successfully evaded existing legislation.

According to estimates in the National Fraud Authority’s Annual Fraud Indicator survey (2010), RSM Tenon said tax evasion is anticipated to cost the UK Treasury GBP15bn annually, or 9% of the current deficit.

Gary Ashford, Head of Tax Risk, Disputes and Investigations at RSM Tenon, commented:

“It’s rare to see such support for tax policies, but entrepreneurs are clearly pleased that HMRC has made tackling this problem its top priority. British business owners do not like the idea of paying substantial amounts of tax while others avoid their obligations.”

“HMRC has made significant efforts to boost its power to investigate anyone it suspects of not meeting their tax liabilities. Further increases in the number of investigations conducted by HMRC are likely; we expect this to be accompanied by the introduction of even greater penalties over the next twelve months as a deterrent to those seeking to avoid their tax commitments.”

RSM Tenon’s poll also found that nearly half (46%) of Britain’s business leaders agree with HMRC’s attempts to set up disclosure agreements with overseas jurisdictions.

In the last year HMRC has focused on UK residents who hold offshore accounts through the Liechtenstein Disclosure Facility. RSM Tenon believes that this scheme, whilst being accessible to entities with accounts in other territories offshore (through the transfer of funds to a Liechtenstein entity), will be established in other territories that the tax man suspects are home to UK taxpayers’ funds. RSM Tenon identified Monaco and Switzerland as likely next targets for HMRC.

Ashford added:

“The global economic crisis has led to a concerted international effort to limit tax avoidance through the use of offshore accounts. Countries, particularly those within the G20, want what they feel they are owed.”

“It’s almost certain that agreements will be reached with other offshore havens, but it is important that HMRC learns the lessons of the arrangements it has already put in place, including from the ongoing Liechtenstein facility.”

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