Managing Your Cash Flow

Autumn Statement 2015: Tax abusers face being hit with 60 per cent penalty fee

3 min read

25 November 2015

Former deputy editor

During the 2015 Autumn Statement, it was announced by George Osborne that the government is introducing a penalty fee of 60 per cent of tax due for General Anti-Abuse Rule (GAAR) as part of the Spending Review.

The HMRC is undergoing a £1.3bn reform to create “one of the most digitally advanced tax administrations in the world”.

This will be achieved by providing all small businesses and self-employed people with digital tax accounts to manage finances online, providing the HMRC with quarterly updates.

Elsewhere, it was announced by Osborne that he and the government will clamp down on the individuals actively taking part in tax avoidance schemes through fixed asset adjustments and so on.

Osborne: “We said £5 billion would come from the measures on tax avoidance, evasion and imbalances. Those measures were announced at the Budget.

“Today we go further with new penalties for the General Anti-Abuse Rule we introduced, action on disguised remuneration schemes and stamp duty avoidance, and we will stop abuse of the intangible fixed assets regime and capital allowances.

“HMRC is making savings of 18 per cent in its own budget through efficiencies – in the digital age, we don’t need taxpayers to pay for paper processing, or 170 separate tax offices around the country.

“Instead, we’re reinvesting some of those savings with an extra £800 million in the fight against tax evasion – an investment with a return of almost ten times in additional tax collected.”

Read more from the Autumn Statement 2015:

As part of the campaign, any case successfully processed by the GAAR will result in the company being charged a penalty of 60 per cent of tax due.

PwC’s international tax partner Stella Amiss commented that the funds raised from the enforcement will be small, but the “the impact on behaviour will be large”.

Simon Wilks, PwC partner, asaid: “The penalty certainly represents a significant disincentive but its interesting to note that we have yet to have a referral under this regime.

“As expected there are also other tough new measures for those who persistently enter into tax avoidance schemes that are defeated by HMRC, including special reporting requirements and a surcharge on those whose latest return is inaccurate due to use of a defeated scheme, with the names of avoiders to be published.”

Tina Riches, national tax partner at accountancy firm Smith & Williamson, is not entirely convinced on the “premature” plan, however.

“Taxpayers are still very much in the dark on what is caught by the GAAR. To date HMRC has not reported on any cases going to the GAAR panel formed after the 2013 legislation, so it seems rather premature to bring in GAAR penalties,” she said.