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| Tough penalties for enablers of tax avoidance | Tough penalties for enablers of tax avoidance |
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| Accountants, bankers and lawyers who devise elaborate schemes to help the wealthy avoid paying their fair share of tax will be hit by a tough new penalty. | Accountants, bankers and lawyers who devise elaborate schemes to help the wealthy avoid paying their fair share of tax will be hit by a tough new penalty. |
| The chancellor announced on Wednesday that professional enablers will be fined up to 100% of the tax their client avoided if an HMRC investigation finds the scheme they helped create falls foul of the rules. | |
| The government said it expected the new penalty, which comes into force in July, to raise at least £10m in the coming tax year, rising to £50m in 2018-19. | The government said it expected the new penalty, which comes into force in July, to raise at least £10m in the coming tax year, rising to £50m in 2018-19. |
| “Since 2010, we have secured £140bn in additional tax revenue by taking robust action to tackle avoidance, evasion and non-compliance,” Philip Hammond said. “But there is more that we can do. We will introduce a tough new financial penalty for professionals who enable a tax avoidance arrangement that is later defeated by HMRC.” | “Since 2010, we have secured £140bn in additional tax revenue by taking robust action to tackle avoidance, evasion and non-compliance,” Philip Hammond said. “But there is more that we can do. We will introduce a tough new financial penalty for professionals who enable a tax avoidance arrangement that is later defeated by HMRC.” |
| The new fine is designed to put extra pressure on accountants and lawyers not to create elaborate schemes to help wealthy people avoid tax. At present, while their clients can be landed in hot water with HMRC, there is little redress against the professionals who design and sell the schemes. | The new fine is designed to put extra pressure on accountants and lawyers not to create elaborate schemes to help wealthy people avoid tax. At present, while their clients can be landed in hot water with HMRC, there is little redress against the professionals who design and sell the schemes. |
| “People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay,” Jane Ellison, financial secretary to the Treasury, said during consultation on the new penalty. “The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs. These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.” | “People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay,” Jane Ellison, financial secretary to the Treasury, said during consultation on the new penalty. “The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs. These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.” |
| Isobel Clift, manager at tax accountants Blick Rothenberg, said the new penalties were the next step in the government’s “war against tax evasion”. She said: “This is about trying to get advisers, accountants and lawyers to do their job and prevent tax avoidance.” | Isobel Clift, manager at tax accountants Blick Rothenberg, said the new penalties were the next step in the government’s “war against tax evasion”. She said: “This is about trying to get advisers, accountants and lawyers to do their job and prevent tax avoidance.” |
| The fines are designed to be levied against accountants and lawyers who create tax avoidance schemes like those used by celebrities including Jimmy Carr, Geri Halliwell and David Beckham. | The fines are designed to be levied against accountants and lawyers who create tax avoidance schemes like those used by celebrities including Jimmy Carr, Geri Halliwell and David Beckham. |
| Tax avoidance hit the headlines in 2012 when Carr and a host of footballers, including Wayne Rooney, were found to be among more than 1,000 people using a tax evasion scheme called K2, which cost the taxpayer £168m. | Tax avoidance hit the headlines in 2012 when Carr and a host of footballers, including Wayne Rooney, were found to be among more than 1,000 people using a tax evasion scheme called K2, which cost the taxpayer £168m. |
| This weekend, Carr said joining the K2 scheme was “a terrible error of judgment” and could have ended his career. He told BBC Radio 4’s Desert Island Discs that he joined the K2 scheme after his financial adviser said: “Do you want to pay less tax? It’s totally legal, you can do this thing, and if it ever comes up you just have to pay them.” Carr said: “You go, ‘yeah, fine, great’.” | This weekend, Carr said joining the K2 scheme was “a terrible error of judgment” and could have ended his career. He told BBC Radio 4’s Desert Island Discs that he joined the K2 scheme after his financial adviser said: “Do you want to pay less tax? It’s totally legal, you can do this thing, and if it ever comes up you just have to pay them.” Carr said: “You go, ‘yeah, fine, great’.” |
| Beckham, Spice Girls Halliwell and Melanie Chisholm and TV stars Anthony McPartlin and Declan Donnelly were found to have used another tax avoidance scheme created by Ingenious Media. | Beckham, Spice Girls Halliwell and Melanie Chisholm and TV stars Anthony McPartlin and Declan Donnelly were found to have used another tax avoidance scheme created by Ingenious Media. |
| Graeme Robb, of Prudential, said Hammond’s crackdown on accountants and lawyers “continues the theme of previous budgets and reinforces the government’s desire to clamp down on often complex tax avoidance strategies”. | Graeme Robb, of Prudential, said Hammond’s crackdown on accountants and lawyers “continues the theme of previous budgets and reinforces the government’s desire to clamp down on often complex tax avoidance strategies”. |
| “These arrangements are a world away from tried and tested mainstream tax planning solutions carried out by the vast majority of advisers on behalf of their clients,” he said. | “These arrangements are a world away from tried and tested mainstream tax planning solutions carried out by the vast majority of advisers on behalf of their clients,” he said. |
| Hammond also announced new measures to stop companies from converting capital losses into trading losses, tackle abuse of foreign pension schemes and introduce UK VAT on mobile roaming outside the EU. | Hammond also announced new measures to stop companies from converting capital losses into trading losses, tackle abuse of foreign pension schemes and introduce UK VAT on mobile roaming outside the EU. |
| A change in VAT on mobile roaming charges means holidaymakers face steep increases in bills if they use their phones outside the EU. The move, which the government says will bring in £65m annually, will add 20% to charges from 1 August. | A change in VAT on mobile roaming charges means holidaymakers face steep increases in bills if they use their phones outside the EU. The move, which the government says will bring in £65m annually, will add 20% to charges from 1 August. |
| “This will resolve the inconsistency where UK VAT is applied to mobile phone use by UK residents when in the EU, but not when outside the EU,” Hammond said. “This will bring UK VAT rules into line with the internationally agreed approach.” | “This will resolve the inconsistency where UK VAT is applied to mobile phone use by UK residents when in the EU, but not when outside the EU,” Hammond said. “This will bring UK VAT rules into line with the internationally agreed approach.” |
| He said streamlining the policy for tax on mobile phone usage globally would “also ensure mobile phone companies cannot use the inconsistency to avoid UK VAT”. | He said streamlining the policy for tax on mobile phone usage globally would “also ensure mobile phone companies cannot use the inconsistency to avoid UK VAT”. |
| Holidaymakers can already run up big bills abroad, with many minimising charges by relying on wi-fi in hotels, bars and restaurants or buying a local sim card. | Holidaymakers can already run up big bills abroad, with many minimising charges by relying on wi-fi in hotels, bars and restaurants or buying a local sim card. |
| It is not clear whether the provision will apply to all European countries when Britain leaves the EU in 2019. | It is not clear whether the provision will apply to all European countries when Britain leaves the EU in 2019. |
| The EU has persuaded mobile operators to cut lucrative roaming charges in recent years as it has sought to create a single market in the telecoms industry. The fees are due to be abolished entirely in June. However, the UK may not continue to benefit from this measure when it leaves the EU. | The EU has persuaded mobile operators to cut lucrative roaming charges in recent years as it has sought to create a single market in the telecoms industry. The fees are due to be abolished entirely in June. However, the UK may not continue to benefit from this measure when it leaves the EU. |
| Hammond said the total benefit from tax changes would amount to £820m over the next five years. | Hammond said the total benefit from tax changes would amount to £820m over the next five years. |