The chancellor Phillip Hammond has announced that from July the government will introduce a “tough new financial penalty” for tax dodgers who engineer avoidance arrangements that are later defeated by HMRC.
The chancellor stressed that the tax changes were about being fair, and claimed: “Just as a strong economy requires a tax system that is competitive, a strong society requires one which is fair.”
“First and foremost, that means collecting the taxes that are due.”
According to Hammond, since 2010 the government has secured £140bn in additional tax revenue by taking robust action to tackle avoidance, evasion, and non-compliance.
He announced that the government will be taking further action to stop businesses from converting capital losses into trading losses, tackling abuse of foreign pension schemes, and introducing UK VAT on roaming telecoms services outside the EU in line with international standard practice.
Together with the new penalty for tax dodgers, Hammond claimed that these measures will raise £820m over the forecast period.
Despite this, there have been mixed reactions. Head of tax at the Association of Chartered Certified Accountants (ACCA), Chas Roy-Chowdhury, said: “This sounds like a good measure in theory, but there is an existing Professional Conduct in Relation to Tax (PCRT) code of conduct.
“Tax professionals who are subject to this existing code, which has been developed in conjunction with HMRC, should not be subject to this new measure.”
Meanwhile, Richard Flax, chief investment officer at digital wealth manager Moneyfarm, commented: “The chancellor’s continued clampdown on tax avoidance in the Budget suggests that Brits will be best served by continuing to focus on simple and transparent investment solutions like stocks and shares ISAs.
Kate Ison, senior associate at Berwin Leighton Paisner, expects the new move to combat tax dodgers will result in increased litigation in the courts. “Tackling tax evasion and avoidance remains high on the government’s agenda. It is likely that HMRC will continue to take an aggressive approach towards challenging tax avoidance, as a way of reducing the tax gap,” she explained.