The measures
The Budget contained a number of announcements reinforcing the government’s commitment to supporting HMRC’s work and resources. A key component of that commitment is an investment in recruitment and new technology for HMRC, forecast to bring in £4.4 billion additional tax revenue by 2024/25.
Specific measures in relation to evasion and avoidance include:
- The introduction of new legislation in Finance Bill 2020 to strengthen the existing Promoters of Tax Avoidance Scheme (POTAS) legislation forming part of a new operational and communications strategy for HMRC tackling tax avoidance;
- Extending the application of the General Anti-Abuse Rule (GAAR) to apply to certain arrangements involving partnership structures;
- New legislation (to be effective both prospectively and retrospectively) to clarify that Limited Liability Partnerships (LLPs) should be treated as general partnerships under income tax rules. This is a response to the recent Inverclyde case, where HMRC’s appeal is currently progressing through the courts;
- Legislation clarifying that HMRC may use automated processes to issue taxpayers with notices to file tax returns and penalty notices, which again confirms recent decisions from case law;
- New legislation to effectively give HMRC preferential creditor status in the UK, including Northern Ireland, on the insolvency of a business to protect the taxes and duties businesses collect from their employees and customers on behalf of HMRC (e.g. VAT, PAYE, employee NIC). The rules are unchanged for taxes owed by businesses themselves; and,
- Proposals to make provision for individuals to be joint and severally liable for tax liabilities of corporate and unincorporated bodies in certain insolvency situations.
In addition, the government has announced that it will be calling for evidence on raising the standards of tax advice. This will to include evidence on the current standards upheld by tax advisers and the effectiveness of government’s efforts to support those standards, to give taxpayers assurance that the tax advice they receive is reliable.
Who will be affected?
The different measures will impact different populations. However, other than the updated POTAS rules the impact is likely to be wide-ranging.
When will the measure come into effect?
The revised POTAS rules will come into force from the date of Royal Assent to Finance Bill 2020.
The LLP changes and automated processes points will apply both retrospectively and prospectively.
HMRC’s preferential creditor status is due to take effect from 1 December 2020 (it was previously to apply from 6 April 2020).