23 November 2016

Autumn Statement 2016: Tax avoidance and fraud

We summarise the tax avoidance and fraud measures announced by the Chancellor in the Autumn Statement 2016.

No let-up on tax avoidance and evasion

Despite boasting £130 billion in additional tax revenue collected since 2010 and one of the lowest tax gaps in the world, the Chancellor announced further measures to tackle tax avoidance and evasion, designed to raise over £450 million by 2021/22.

On the hidden economy, plans were announced to further bolster HMRC data-gathering powers, this time to obtain information from money service businesses. The Government will also consider whether access to certain services or licences to businesses should be conditional upon being registered for tax. Further work will be undertaken on sanctions for those who repeatedly and deliberately participate in the hidden economy.

On offshore-related tax evasion, the message to those with offshore interests was clear – deal with any past problems now and ensure you are tax compliant in the future. A legal requirement to correct past non-compliance was confirmed, with tough sanctions likely to apply to those who don’t. The Government will also consult on a requirement for those advising on complex offshore structures to notify HMRC, including details of the structures and related client lists.

Following extensive consultation, the Chancellor confirmed that a new penalty will apply to ‘enablers’ of failed tax avoidance schemes. Those using such schemes will also face a penalty where they have failed to take independent advice.

Measures announced in the 2016 Budget to tackle the use of disguised remuneration schemes by companies will be extended to the self-employed. This includes a retrospective tax in 2019 on loans related to such schemes. Tax relief on employer contributions to new schemes will be denied unless taxes are paid within a specified period. HMRC will also develop its ability to identify emerging insolvency risks, through the use of outside analytical expertise.

Additional points

  • HMRC’s data-gathering powers will be extended to money service businesses.
  • The Government will consider making access of businesses to licences or services conditional on the businesses being registered for tax.
  • Proposals will be developed to strengthen sanctions for those who repeatedly and deliberately participate in the hidden economy.
  • There will be a new requirement to correct past failures to pay UK tax on offshore interests within a defined period of time, with sanctions for failure.
  • There will be consultation on a new requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.
  • HMRC is being provided with additional funds to increase its activity on countering avoidance and taking cases forward for litigation.
  • As previously announced there will be a new penalty for persons who enable another person or business to use a tax avoidance arrangement that is later defeated by HMRC.
  • Changes will provide earlier certainty on individual matters in large, high-risk and complex tax enquiries.