Budget 1999: Tax Avoidance - New measures will help to stamp out serious fraud

ACCOUNTANTS AND other tax experts warmly welcomed the Chancellor's decision not to proceed with a general anti-avoidance rule (GAAR) for corporate direct taxes or a mini-GAAR for VAT on construction services. They had regarded the proposals issued by the Inland Revenue last autumn as likely to be highly disruptive to business.

However, a statement issued by the Inland Revenue and Customs & Excise after the Chancellor sat down announced a package of measures aimed at "securing the tax base" that was expected to yield more than pounds 1bn over three years and protect a further pounds 3bn of future revenues.

In addition, it is intended that next year's Finance Bill will contain measures to modernise the Inland Revenue's powers for the criminal investigation of suspected serious tax fraud. In the meantime, draft clauses will be issued for consultation.

While accountants noted that Mr Brown regarded the GAAR approach as an option for the future if more specific legislation did not deter tax avoidance, they were encouraged by the appearance of two measures aimed at sophisticated large companies.

One stamps out the practice of avoiding capital gains taxation arising from the sale of a subsidiary through paying a dividend, selling the companyto an offshore subsidiary and then making the real "outside sale". This is expected to yield pounds 130m a year.

The other stops companies avoiding UK tax on tax haven income by protecting it through passing a large UK dividend through the controlled foreign company. This is expected to yield between pounds 50m and pounds 100m.

In addition, the Inland Revenue announced its intention to crack down on "one-man companies", or what it calls "personal service provision".

Noting that there has been concern about the hiring of individuals though their own service companies so they can exploit the tax advantages offered by corporates, it says it will be discussing the practical application of such measures with a view to introducing legislation in April 2000.

Nicholas Woolf, tax partner with accountants Arthur Andersen, said that drawing the line between genuine self-employed contractors and those who are employees will be difficult for the Revenue - and that is the likely reason for the consultation.

There was also an attack on the practice designed to avoid the payment of stamp duty. Hitherto, companies have been able to avoid paying stamp duty by travelling abroad, signing the documents and leaving them in the chosen country. Now, interest will arise if the documents are brought back into the country, for example, for a legal case. The Government also announced plans to modernise payments and penalties associated with stamp duty.

Customs & Excise also announced measures that it said would protect pounds 1.5bn of future VAT revenue.

There will also be measures to counter VAT abuse through misuse of the capital goods scheme, timing the submission of returns to exploit the repayment supplement provisions and assigning debts to third parties to reduce the amount of VAT due or claiming too much bad debt relief.

Roger Trapp

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk