Finance Bill Tracking Service 2009 | Budget 2009

Budget 2009 - Protecting Tax Revenues

Today the Chancellor announces a series of measures to protect the tax system from abuse and ensure that all individuals and businesses pay their fair share of tax.

The Government is determined to continue to challenge tax evasion and avoidance, which undermine fiscal stability, damage the delivery of policy objectives, impose significant costs on society and shift a greater burden of tax onto ordinary taxpayers.

This Budget includes measures to tackle evasion, including the publication of the names of deliberate tax defaulters and an offshore disclosure opportunity, and targeted anti-avoidance measures as a proportionate response to those who seek to avoid paying their fair share.

The Government has also been leading international efforts to tackle tax havens and tax evasion through its Presidency of the G20. This will deliver improved transparency and exchange of tax information between jurisdictions and important new commitments from a wide range of countries.

Budget includes a package of measures which raise over £1 billion during the period 2009-10 to 2011-12, and protect a further £3 billion per year of tax receipts by 2010-11 from erosion by tax evasion and avoidance.

DETAILS

Offshore disclosure

Please see Press Notice 1 for further details of a New Disclosure Opportunity (NDO) for offshore bank account holders.

Publication of names of serious tax defaulters

Please see Press Notice 1 for further details of the publication by HMRC of the names of deliberate tax defaulters.

New reporting requirements for tax defaulters

A small minority of tax defaulters put significant tax revenues at risk. The Government today announces that those who have incurred a penalty for the deliberate understatement of tax of at least £5,000 will be required to provide more information on their tax affairs for up to five years to ensure they have proper systems to be able to make a correct tax return and allow HMRC to monitor future compliance.

Accountability of senior accounting officers

The Government today announces a measure to establish a statutory requirement for senior accounting officers of major corporates to certify personally that adequate controls to prepare accurate tax computations are in place.

Developing the disclosure of avoidance schemes regime

Disclosure of Tax Avoidance Schemes (DOTAS) is an important part of the tax framework giving HMRC early warning of avoidance schemes. HMRC will begin discussions with interested parties with a view to extending the 'hallmarks' used to identify avoidance schemes, to ensure they continue to bear down on avoidance, and revising the penalty regime to introduce tougher sanctions for the non compliant.

Tacking avoidance of tax on disguised interest and transfers of income streams

Following consultation the Government today announces the introduction of principles-based legislation to counter avoidance in two areas involving financial products, in response to continued attempts at abuse. Specifically, the legislation will prevent schemes designed to avoid tax on interest received and schemes seeking to side-step existing anti-avoidance legislation on the sale of income streams.

Proposals to counter avoidance using financial products

The Government today announces a measure to counter avoidance schemes involving the use of convertible securities within a group to create accounting asymmetries and the creation of artificial losses on loans and derivatives.

Foreign exchange targeted anti-avoidance rule

The Government today announces a targeted anti-avoidance rule to stop the use of tax avoidance schemes that seek to exploit the foreign exchange tax matching rules. Exchange gains or losses on borrowings or currency derivatives will only be disregarded for tax purposes if they do not arise from tax avoidance arrangements.


Exploitation of the double tax relief and manufactured overseas dividend rules

The Government today announces measures to clarify the rules that provide relief for UK tax against foreign tax payable on foreign income (double taxation relief); and the rules dealing with manufactured overseas dividends. These changes, effective from today

•    prevent a deduction for foreign tax on the receipt of a Manufactured Overseas Dividend by a company, where the economic cost of the foreign tax has not been borne by the company;

•    ensure that?banks always take a reasonable proportion of their funding costs into account in the calculation of double taxation relief.

The changes will also put beyond doubt:

•    that any receipts that are in substance trade income will be taxed accordingly. Banks and other financial institutions will be unable to gain a tax advantage by fragmenting parts of their trade into investment companies; and

•    that double taxation relief will be given net of any repayments of foreign tax, whether made to the original payer or otherwise.

Countering abuse in the corporate intangible fixed asset regime

The Government today announces a measure to clarify the intangible fixed assets regime rules by confirming that goodwill is treated as intended. Effective from today, the legislation will confirm that for the purposes of the corporate intangible regime, goodwill includes internally-generated goodwill. It also confirms that all goodwill is created in the course of carrying on the business in question and is subject to rules determining whether goodwill is treated as created on or after 1 April 2002.

Ensuring tax and National Insurance paid on lease premiums

The Government today announces a measure to prevent tax avoidance where an employee or director of a company is provided with living accommodation through the payment of a lease premium rather than a full market rent for the use of the property. From today, those who take out new leases using a lease premium will pay tax and National insurance contributions as if the full market rent had been paid.


North Sea Fiscal Regime: Preventing Accelerated Decommissioning Relief

The Government announces a measure that changes the North Sea fiscal regime to ensure companies cannot access tax relief for decommissioning oil and gas infrastructure years in advance of the decommissioning activity actually being carried out. As originally intended, tax relief for this expenditure will only be incurred when decommissioning work is actually carried out.

Spotlight on selected avoidance schemes

The Government announces today that HMRC will shortly publish a Spotlight giving notice of selected avoidance schemes that are thought to be ineffective to discourage potential users. HMRC will challenge these schemes when encountered.

Structured foreign exchange arrangements

The Government announces today the publication of a technical note in the summer. The note will set out the issues and potential approaches to certain structured financial arrangements (often described as overhedging or underhedging) that, although not undertaken for tax avoidance, seek to pass on to the Exchequer, through tax relief, commercial risk that would otherwise be borne by groups on such transactions. The Government believes that the economic risks should be shared between the Exchequer and business as Parliament intended.

Alcohol Fraud Strategy

The Government today announces the renewal of its strategy for protecting honest businesses and addressing tax losses through alcohol fraud. 'Tackling Alcohol Fraud' is a programme of change for implementation in stages through 2009/10, including:

•    strengthening the operational response to alcohol fraud, establishing new alcohol anti-fraud teams as part of a centrally coordinated effort to detect, disrupt and dismantle organised criminal networks and illicit supply chains;

•    legislating where necessary to make life tougher for criminals and easier for honest businesses to compete; and,

•    working closely with legitimate businesses in the continuing fight against alcohol fraud.