The Finance Bill 2014 should become the Finance Act 2014 in July 2014, bringing into law about 600 more pages of tax provisions. Among the new legislation will be a potent weapon for HMRC in its battle with users of artificial tax avoidance schemes.
Finance Act 2014 law will allow HMRC to seek “accelerated payments of tax” from users of tax avoidance schemes which are either subject to the Disclosure of Tax Avoidance Schemes (DOTAS) requirements or are counteracted by the General Anti-Abuse Rules (GAAR). If the scheme is subsequently judged to be effective by the courts, then HMRC will refund the tax paid. In an approach was has been described as retrospective, HMRC will be able to demand payment for schemes set up years ago which have yet to go through the courts. This is no small beer: HMRC is said to be looking at cases involving £5.1 billion in tax and 33,000 taxpayers. The first tax demands are expected to be issued by HMRC as soon as the Act comes into force.
The result is likely to be a flood of litigation, as the users of the schemes caught in HMRC’s net try to delay payment to HMRC by proving that their schemes are valid. It has already been reported, that, in response, the Ministry of Justice is busy recruiting more solicitors and barristers to sit as judges at Tax Tribunals.
This latest twist in HMRC’s fight against tax avoidance is another reminder that one of the few areas where the Treasury is happy to increase spending is in countering lost revenue. Perhaps that is why the numbers of new tax avoidance schemes reported under DOTAS is continuing to fall.