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A Clampdown on Tax Avoidance in 2013

A Clampdown on Tax Avoidance in 2013It seems that the government are finally starting to react to the public outcry over tax avoidance and evasion. In the past, the government have been wary of upsetting the rich in the UK over fears that they would take their business overseas.

It is still George Osborn’s long term goal to make the UK an attractive investment choice for the rich, however, after this year’s budget, the tide has somewhat turned in favour of the general public.

In his speech, Osborn claimed that the new measures are “the largest ever package of tax avoidance and evasion measures presented at a Budget.”

The Biggest Culprits

In 2012, Boots, Starbucks, Amazon, Microsoft and Google were famously flagged for using tax-avoidance schemes. By using offshore subsidiaries, loans, royalties and management fee programmes, these companies were able to substantially reduce taxable profits in the UK.

biggest culprits

Whilst the rest of us might find out that we are owed a rebate or refund of up to £2,500 by using the Rift tax refund calculator, these top companies are avoiding millions each year in tax.

A 12-month investigation conducted by ActionAid also found that Associated British Food was transferring around $13 million a year into a tax haven from Zambia. In order to please their shareholders, the scheme would ensure maximum return on investment by removing nearly 19 times the amount the British taxpayer donates to Zambia in gift aid to these offshore facilities.

It was revealed in 2012 that HM Revenues and Customs (HMRC) spent around £63,000 on publicity around the issue of high-end tax evasion schemes compared to the £17.5m used to raise awareness of benefit fraud in the UK. This figure is 27 times the amount spent of tax-evasion campaigns.

New Measures to Step Tax-Avoidance

The government says that advisors which devise tax-avoidance schemes for clients will be named and shamed as part of a bid to pull back around £5bn a year which would otherwise be lost to tax loopholes.

Agreements with the Isle of Man, Guernsey and Jersey have already been reached which will yield more than £1bn in unpaid taxes. A London based consultancy has claimed that there is up to £600bn in assets within these three crown dependencies.

New Measures to Stop Tax-Avoidance

The UK will also use its Presidency of the G8, the world’s richest nations, to push for more international action as most tax avoidance takes place outside of British jurisdiction. Other action includes tackling the abuse of partnership rules and other devices used by tax-avoiding companies which has been planned since last year.

New measures will also tighten the rules for companies which choose to arrange loans that do not attract tax. These loans have been used for directors or shareholders to replace taxable salaries or dividends.

Some say that enforcing such measures is simply not possible as the problem isn’t just limited to the UK, it is a worldwide problem. It was also noted in 2012 that the HMRC were dealing with a backlog of around 41,000 cases involving small companies and individuals, which amounted to around £10.2bn.

Therefore, as well as dealing with current cases, the HMRC resources and time will be stretched considerably by the backlog, which will mean that it will take longer to clean up the problem. The new policy will also apply to just one bidder or company at a time, rather than all members. This means that whilst one company is being clamped, others can continue to use tax-avoidance schemes.

avatar Name: Alexandra Eager
About: Alex has worked as a Financial Controller and Finance Director for many years for a variety of companies across a range of industries but more recently she has moved away from accounting working for an internet marketing agency as Finance and Operations director, primarily overseeing the finance functions and search engine optimisation (SEO) for clients. Follow Alex on G+ and on Twitter @Alex_BusDirUK
Alex runs her own company with two fellow owners developing a suite of e-commerce web sites and promoting them directly. “I found that SEO and finance were quite compatible both needing an eye for detail, research and analysis as well keeping up with new developments and changes.”

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