In a world of paradise papers and tax scandals it will come as no surprise that the government has sought to defend its record in tackling avoidance. In amongst the papers put out around the budget, HM Treasury published a document on ‘Tackling tax avoidance, evasion and non-compliance’. This is a summary of all of the anti-avoidance legislation introduced since the first coalition budget in the Summer Budget 2010, through to those measures proposed in last week’s Budget.
According to this document there were 18 new measures announced on 22 November targeting tax avoidance. It is debatable whether these are any more or less effective than any of the previous provisions.
There were one or two measures improving HMRC’s powers – which may help it in tackling some of the offshore avoidance planning we saw in the paradise papers. In particular, time limits for the period for which HMRC can go back and assess tax, even for careless errors, was extended to 12 years and additional requirements were placed on advisers to notify HMRC of certain offshore structures.
However, reading these provisions collected together in one place a striking theme starts to emerge. The government seem to have found an answer to the question:
How do you reduce the tax gap whilst making ‘efficiency’ savings in HMRC?
The answer is that you take HMRC out of the equation, you make the responsible tax payers in both the public and private sectors accountable for the actions of the irresponsible.
This goes across a number of sectors and taxes:
- VAT not being paid in the construction sector? The responsibility shifts, along the supply chain, to those that are compliant.
- Contractors are providing services through a service company and HMRC isn’t sure whether they are really self-employed or not? Responsibility was shifted to public sector bodies contracting with them, and there are proposals to extend this liability to private sector businesses.
- Public sector licenses will become conditional on demonstrating tax registration and compliance
- Online traders dodging their VAT registration? The online market place providing the venue is now responsible.
If these are successful, where next? Is there really much difference between the online market place being responsible for traders’ VAT and making a landlord responsible for the VAT of the company that rents the shop from them? If an online market place is required to show a valid VAT number for each trader advertising on its site, what about newspapers? Should they also be responsible for checking that all their advertisers hold a valid VAT number? Will the government in future make other businesses jointly liable for VAT on transactions carried out through their systems?
It does seem that the compliance costs of bringing the rule breakers to task is being passed from HMRC to taxpayers themselves and it will be interesting to see where this ends.