Budget Statement March 2020 ~ Tax Disputes and Investigations

Notwithstanding the current pandemic, the Government’s ongoing agenda to reduce the tax gap, currently estimated to be £35bn in the latest HMRC annual report, is being enhanced by investing in additional compliance officers and new technology for HMRC, and expects to raise a further £4.7 billion in tax. In this post, we focus on how this may affect you.

Tackling Tax Evasion and Avoidance

The government announced a set of targeted measures to ensure that businesses pay the tax they owe, under the banner of “fairness”. This includes measures to crack down on tax abuse in the construction industry, and illicit tobacco, as well as measures to tackle the promoters of tax avoidance schemes.

To tackle the hidden economy there is legislation to make the renewal of licences to drive taxis and private hire vehicles, operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax. The objective is to make it more difficult for non-compliant traders to operate.

Loan Charge Review

The Loan Charge tackles disguised remuneration tax avoidance schemes. These are tax arrangements that seek to avoid income tax and NICs by paying income to individuals in the form of loans, usually via an offshore trust, with no expectation that the loans will ever be repaid.

Draft legislation has been issued to amend the scope of the Loan Charge:

• it will now only apply to outstanding balances of disguised remuneration loans made between 9 December 2010 and 5 April 2019 inclusive
• it will not apply to loans made in tax years before 2016/17 where a reasonable disclosure of the use of a disguised remuneration tax avoidance scheme was made within the relevant tax return or associated documents where appropriate, and HMRC failed to take any action (for example by opening an enquiry)
• those affected by the Loan Charge will be able to elect to split their loan balance over three consecutive years 2018/19 to 2020/21 (rather than the full charge arising in 2018/19)
• the date by which the additional information form must be returned to HMRC will move from 1 October 2019 to 1 October 2020. The form requires taxpayers to provide full information to HMRC relating to any outstanding disguised remuneration loans for which they will need to make tax payments.

The amendments have been made due to concerns raised about the impact of some aspects of the charge, particularly the large tax bills arising in 2018/19 for individuals who had used the schemes. An estimated 11,000 individuals will be removed from the charge due to the date the loan charge applies being changed to 2010 and the provisions for those who have made reasonable disclosures.

Covid 19

Taxpayers presently involved in current HMRC investigations and inquiries including Code of Practice 9 investigations will be concerned at how the COVID-19 crisis affects their situation and you can find out more about the approach HMRC are likely to take here. Alternatively, if you think this affects you, please contact us for advice.