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UK Announces Crackdown on Tax Avoidance

by Jason Gorringe,, London

09 December 2010

David Gauke, Exchequer Secretary to the UK Treasury, has announced a number of changes to legislation to tackle tax avoidance.

According to the Treasury, these announcements will protect forecast revenues estimated at up to GBP5bn over the next four years, and are expected to raise over GBP2bn in additional revenue during the course of this parliament.

Two measures with immediate effect will tackle tax avoidance by preventing groups of companies using intra-group loans or derivatives, to reduce the group’s tax bill, and, addressing schemes where a company does not fully recognize certain amounts in its accounts involving loans and derivatives

Three measures, with further detail to be set out shortly, will tackle tax avoidance through: addressing the practice of disguised remuneration; stopping investment companies retrospectively changing the currency they prepare their accounts in for tax purposes; and, tackling businesses who artificially split the supply of services to reduce value-added tax.

In addition to these measures, the Exchequer Secretary has asked Graham Aaronson QC to lead a study into a General Anti Avoidance Rule (GAAR). This study will consider whether a GAAR could deter and counter tax avoidance, whilst providing certainty, retaining a tax regime that is attractive to businesses, and minimizing costs for businesses and HM Revenue and Customs.

The government will publish on December 9 a draft Protocol that will set out the circumstances in which it will consider changing legislation with immediate effect.

TAGS: tax | investment | business | tax avoidance | United Kingdom | legislation | currency

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