22 November 2017

Autumn Budget 2017: Tax avoidance and fraud

A summary of the key changes announced by the Chancellor during the Autumn Budget 2017 in relation to tax avoidance and fraud.

Tackling tax avoidance

A number of measures have been announced to tackle tax avoidance, evasion and non-compliance, which are forecast to raise an additional £4.8 billion between now and 2022/23.

Withholding tax: royalties

With effect from April 2019, withholding tax obligations will be extended to royalty and certain other payments made to some low or no tax jurisdictions in connection with sales to UK customers, regardless of where the payer is located.

Online VAT fraud

In order to tackle VAT fraud, the forthcoming Finance Bill is to introduce joint and several liability provisions in relation to online marketplaces. This means:

  • any future UK VAT that a UK business using the online marketplace fails to account for after the issue of an HMRC notice against the platform provider will be payable by that provider;
  • the platform provider will also be accountable for the VAT that any non-UK business selling goods via the online market place fails to account for, if the platform provider should have known that the non-UK business was liable to be VAT registered; and
  • the online marketplace must show the third party’s VAT registration number.

Offshore issues

The Government will publish a consultation response on the proposed requirement for designers of certain offshore structures to notify HMRC of both the structures and clients using them. In a separate move, assessment time limits for non-deliberate offshore tax non-compliance will be extended so that HMRC can assess at least 12 years of back taxes without needing to establish deliberate non-compliance.

Profit fragmentation

The Government will consult in 2018 on the prevention of the avoidance of UK tax by the fragmentation of UK income between unrelated entities.

Intangible fixed assets

The rules will be updated so that a licence granted by a company to a related party in respect of intellectual property is subject to a market value rule. A company making such a disposal will be prevented from recognising less than the market value of the licence.

Depreciatory transactions

The Government will remove the six-year time limit that applies to the requirement for companies to adjust for transactions that have reduced the value of shares being disposed of in a group company, to ensure that any losses claimed are in line with the actual economic loss to the group.

Double taxation relief

A restriction to the relief for foreign tax incurred by an overseas branch of a company will be introduced where the company has already received relief overseas for the losses of the branch against profits other than those of the branch.

Insolvency and phoenixism risks

The government will explore further means for tackling the perceived abuse of the insolvency regime and ‘phoenixism’. A discussion document will be published in 2018.

Hidden economy: conditionality

The Government will publish a consultation response next month on the proposed requirement for designers of tax arrangements to notify HMRC of certain offshore structures that could be misused to evade taxes, and of the clients using them. This work will be taken forward in conjunction with the OECD and EU.

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