Tax Avoidance: Loopholes closed to stop system abuse

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Indy Politics

A string of measures to clamp down on tax avoidance by companies and individuals and protect the revenue system from abuse was announced.

They include a crackdown on companies that get tax breaks when investing in new equipment by leasing it on a long-term basis.

The Treasury is concerned it does not make these tax breaks back because companies sell on the leases once they start producing a return. However, Paul Nash, a tax partner at Deloitte, said: "The proposed changes to leases will hit the UK's traditional industries such as shipping and manufacturing hard."

Other new measures will hit companies that artificially create capital losses in order to reduce corporation tax bills and those that move the ownership of intangible assets between subsidiaries in order to artificially generate tax relief.

In addition, the Chancellor said he would extend the disclosure regime launched in the 2004 Budget, which requires companies setting up tax avoidance schemes to register them with HM Revenue & Customs. The regime will, in future, cover income tax, corporation tax and capital gains tax.

Michael Caden, a tax partner at accountant BDO Stoy Hayward, said: "The Chancellor must ensure there is sufficient protection to ensure genuine business arrangements and routine tax planning are not caught by measures designed to prevent tax products being marketed which lack any real commercial substance."

Personal taxpayers will also face new charges. Individuals who are resident in the UK for tax purposes will no longer be able to escape income tax on assets transferred to an offshore trust.

It will no longer be possible for people to set up artificial trusts that enable them to appear to have given away assets they still use.

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