UK Tax Sector Angered By Budget Blows

by Robin Pilgrim, LawAndTax-News.com, London

28 March 2005

According to a report from the Legal Week news service, the UK's tax sector is reeling following blows delivered by Chancellor Gordon Brown in his recent budget.

In particular, the crackdown on tax 'loopholes' used by major companies to minimise their tax liability was cited as a concern by tax advisers.

In the section of the Budget concerned with 'Building A Fairer Society', the government observed that:

"The disclosure rules have revealed a number of areas of the tax system at risk from high levels of tax avoidance. International transactions have emerged as a particular concern, with increasing globalisation presenting new opportunities for those attempting to avoid their obligations."

"Building on the action taken in the 2004 Pre-Budget Report, the Government is introducing two new anti-avoidance rules which will allow the Inland Revenue to issue a notice to counter a tax advantage in specific circumstances where a UK tax avoidance motive is present. These new measures will tackle arbitrage, where companies seek to gain a tax advantage by exploiting differences within and between tax codes and excessive claims for double taxation relief."

Speaking to Legal Week with regard to the stance assumed by the UK authorities on arbitrage, Slaughter and May tax chief, Tony Beare observed that:

"This is a major change and one that could make the UK far less attractive to business if it is stringently applied."

Meanwhile, global head of tax at Linklaters, Guy Brannan commented:

"I am sceptical that they will raise any more money as people will stop doing deals. In the short-term we will see lots of plcs unwound and restructured, but in the long term there will be a slowing down in derivatives and structured finance-type deals."

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