Tax Avoidance
form of capital allowances which then reduces your tax liability.
These companies are certainly paying large amounts in PAYE income tax and National Insurance that is deducted from employees, so they will pay that plus employers insurance contributions. Also, any VAT they charge to customers will go to the exchequer. It’s very narrowly focused to just be looking at corporation tax. Their total tax payments might be quite significant.
In addition there will undoubtedly be management expenses and fees for use of trade marks. All these expenses are only allowed to the extent that they represent an “arm’s length” level of payment i.e. they cannot just be any concocted amount the company considers it wants to charge in order to keep its UK corporation tax payments low.
Remember, avoidance is legal; evasion is illegal. Avoidance uses the law to mitigate your tax liability. The tax payer might interpret the law one way, and HMRC might say it should be done another way, which would lead to them having a discussion (and possible going to court/tribunal) and it could be settled to favour the tax payer or HMRC.
Q
Do you think there should be changes made to be able to limit
tax avoidance, or to tell companies how much they should be made to pay?
The problem is you have the law, and then we have a lot of tax avoidance measures, a disclosure regime, plus we are having a new tax avoidance law (GAAR) coming in from next year. I’m not sure how much more we could have, unless you say a company is only allowed to have X-amount of turnover and then they have to pay ‘this much tax’, but that’s getting dictatorial. The UK needs to stay a good place to do business.
We need to clamp down on informal economy Q
Can you tell us more about the new General Anti-Avoidance Rule
(GAAR)?
The Government is introducing the GAAR following an independent review led by Graham Aaronson QC, who concluded that the introduction of a targeted rule would deter artificial tax avoidance schemes and contribute to providing a more level playing field for business. As well as considering Mr Aaronson’s report in detail, the Government has held informal discussions with business,
Q
Is there anything else you would like to add?
There’s a lot of propaganda flying around without addressing the facts. These companies could very well go elsewhere, so what we need to do is look at the tax avoidance and see why it is how it is. These companies are creating jobs, paying PAYE, spending money and paying VAT.
tax evasion, where people are trying to get under the radar. That’s where the attack from HMRC and the government should be, rather than ordinary businesses.
tax practitioners and representative bodies in order to hear their views prior to drawing up the consultation and draft legislation, both published today.
The Government is introducing the GAAR following an independent review led by Graham Aaronson QC, who concluded that the introduction of a targeted rule would deter artificial tax avoidance schemes and contribute to providing a more level playing field for business.
In line with Graham Aaronson’s recommendations, the proposed GAAR will apply to the main direct taxes and National Insurance. As announced at the Budget, it will be expanded to cover Stamp Duty Land Tax (SDLT). The consultation also proposes an extension of the GAAR to Inheritance Tax and makes clear that the Government will consider including further taxes if appropriate.
The GAAR will apply to income tax, corporation tax (including linked taxes such as the Bank Levy), CGT, PRT, SDLT, the proposed annual charge on ownership of high-value residential properties and, by virtue of separate legislation, NICs.
Where one of these taxes is avoided by virtue of the operation of a double tax treaty, the GAAR may still apply, despite the primacy normally given to treaties over domestic law. HMRC justify this by reference to the OECD commentary on Article 1 of the Model Tax Convention, which provides that contracting states do not have to grant the benefits of a double tax convention where arrangements constituting an abuse of the convention have been entered into.
The GAAR will not apply to VAT, which has its own doctrine of abuse of law.
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