Companies that run aggressive tax-avoidance schemes will be forced to provide the Government with details of all their celebrity and business clients under a crackdown to be announced today.
In proposals to tackle the promoters of "contrived" tax schemes, Her Majesty's Revenue and Customs intends to contact rich beneficiaries directly and warn them of the financial cost of deliberately avoiding tax.
Companies which fail to disclose the tax-avoidance schemes they run could also be "named and shamed" and face hefty fines – while the individuals behind them will be forced to take personal liability for promoting them.
The new measures come in the wake of the pubic outcry over the tax affairs of the comedian Jimmy Carr who sheltered £3.3m through an offshore scheme. Such arrangements are not illegal but their ethics have been questioned.
Mr Carr, who belatedly apologised for a "terrible error of judgement" in the wake of the scandal, is believed to be just one of thousands of wealthy people in Britain each year who pay as little as 1 per cent income tax using legal but "below the radar" accounting methods.
Individual tax avoidance costs the economy £4.5bn out of £7bn lost every year, according to HMRC.
Globally, as much as £13trn is thought to be sheltered in offshore tax havens, new research published yesterday suggests. According to a study by the former chief economist at the management consultants McKinsey, much of the money is managed by a small number of banks including UBS and Goldman Sachs and placed in tax havens. UBS and Goldman Sachs have not responded to the findings.
As part of moves to combat the problem, the Treasury will launch a consultation today aimed at shutting down companies which have made millions of pounds from helping the wealthy avoid paying their fair burden of tax.
Under the proposals, the Treasury:
- will extend financial-services-mis-selling rules to fine companies that promote schemes judged to be illegitimate;
- will identify and communicate directly with customers of such schemes warning them of the financial penalties of deliberately avoiding tax;
- will extend the liability for mis-selling tax-avoidance schemes from companies to individuals. This will help where a firm is dissolved, or an individual promoter changes firm.
The Government also plans to make it more difficult for the promoters of such schemes to avoid disclosing to the Treasury how they work. Firms could be fined if they don't disclose the schemes they run and responsibility will be imposed on employees to comply with Revenue guidelines.
The Treasury estimates there are around 20 firms offering bespoke tax-avoidance plans.
The Treasury minister David Gauke is expected to compare the people who make money from devising complex offshore avoidance schemes to "rogue builders". He will also suggest they could be publicly "named and shamed" in an effort to deter people from investing in them.
"We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill," he will say. "These schemes damage our ability to fund public services and provide support to those who need it. They harm businesses by distorting competition. And they undermine the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride."
The move comes as the Government faces embarrassment over the tax affairs of one of its own leading donors.
It emerged yesterday that George Robinson, a financier who donated £50,000 to the Conservatives last year, has been ordered to pay back millions of pounds in tax following a court ruling that an offshore scheme he had used was "cosmetic".
Mr Robinson's hedge fund set up a Guernsey trust in 2004 after being advised it could avoid paying £3.3m in National Insurance contributions due on bonuses worth £24m. But the scheme was outlawed by the Treasury soon after it was set up.
Mr Robinson and his partners dissolved the trust, selling the shares and paying themselves the proceeds. They argued that because of the way they had dissolved the scheme, they did not owe almost £10m in income tax on the payments that they would have paid under the original arrangements.
However, a tribunal ruled that they had to pay back the National Insurance contributions and the income tax.
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