Chancellor George Osborne has spurned demands for punitive measures against professionals responsible for designing aggressive tax-avoidance schemes – but announced new sanctions against multinationals that divert profits to escape tax.
Today’s autumn statement also introduces major reforms to stamp duty land tax and abolishes the 55% tax on the transfer of pension rights.
Measures announced include:
- A ‘diverted profits’ tax applied at a rate of 25% on multinationals using ‘artificial arrangements’ to divert profits overseas in order to avoid UK tax. Experts immediately dubbed this the ‘Google tax’. Paul Rutherford, tax partner at national firm DLA Piper, said that while the chancellor did not name names ‘it is likely that he had large multi-national tech companies - many of which have been criticised recently for the amount of UK corporation tax they pay - in mind when making his announcement’. He added: ‘It is entirely unclear how this new tax will work as the government is yet to provide further detail.’
- A consultation to open early next year on ‘further deterrents for serial tax avoiders’ and on penalties for tax-avoidance cases where the general anti-abuse rule applies. HMRC will publish summary information about notified tax-avoidance schemes and their promoters. However the chancellor did not respond to calls by Labour’s Margaret Hodge, chairman of the commons public accounts committee, for penalties against what she called a ‘grubby industry’ of ‘shameless tax advisers and promoters’.
- Reforms to the banding system for stamp duty land tax. From tomorrow, rates will apply only to the part of the property price that falls within each band, similar to the structure of income tax, rather than jumping at each threshold. Transitional rules will allow buyers who have already exchanged on a home but not completed to choose whether to pay stamp duty under the existing or new rules.
- Further action to reduce avoidance of stamp duty land tax by individuals purchasing and holding homes through companies and other corporate entities.
Law Society vice-president Jonathan Smithers said: ‘We are delighted to see that the chancellor has recognised the distortions in the market caused by the previous method of calculation. This is something which we, and others involved in the house-buying process have sought for some years.
‘We hope that these changes will iron out some of the current unfairness on sellers of properties whose true value is just over the previous threshold for a higher rate of tax, and will result in a more efficient and fairer system which benefits the residential property market.’
Eddie Goldsmith, chairman of the Conveyancing Association said that home-buyers would very much welcome the abolition of the crude ‘slab’ system.
‘Stamp duty is one of the forgotten costs of the home-buying process and can be a major barrier to a purchase reaching completion. The fact that the majority of buyers, particularly those seeking to get onto the housing ladder, will see their tax reduced is a welcome reform. It will help keep the market buoyant and give more buyers the chance of owning their first home.’
Dawn Register, partner, BDO, tax dispute resolution, said of the statement overall: ‘This really is an “anti-avoidance budget” with a raft of measures to tackle corporate tax avoidance, pursue offshore tax evaders and increase the flow of information from around the world to HMRC.
‘Therefore, it is no surprise that the chancellor has confirmed that the crackdown on tax avoidance and evasion, which is estimated to raise a further £5bn for the Treasury, will continue with full force during the next parliament.’ She said she expected to see ‘robust action’ by HMRC to squeeze additional tax from the top 20% richest people in the country.