Tax Update (September 2009)

Chancellor plans crackdown on tax avoidance

Treasury Minister Stephen Timms has suggested that Chancellor Alistair Darling will use his Pre-Budget Report later this year to step up action on UK companies' use of tax avoidance schemes and tax havens.

Although tax avoidance, as opposed to tax evasion, is not illegal, Timms denounced it as "morally wrong" and said the report would include measures to "tilt the game back towards honest, hard-working taxpayers".

Speaking in front of an audience of tax experts at the Treasury, Timms claimed that the recession had resulted in a "different world, where tax cheats would be pursued more vigorously than ever before".

He accused companies, both large and small, of behaving as though they were "playing a game" against the authorities and of trying to find ways around rules designed to make the tax system more efficient and equitable. Timms claimed these efforts served only to increase the complexity of the tax system and risked harming business.

In his Pre-budget Report, the Chancellor is expected to outline measures to tighten up the rules on the use of tax avoidance products, allow HMRC greater access to information on users of such schemes and increase the penalties for non-compliance.

What Mentor can do to help

In the current economic climate, what is legal is not necessarily morally acceptable when it comes to tax and the expected announcement from Alistair Darling represents another move towards tougher enforcement by the tax authorities.

This heightens the importance not only of getting the right advice from your accountant but of having the right protection in place should your tax affairs come under scrutiny.

If you have any questions on how this move may affect your business, just call the Mentor Tax Advice Service on 0800 634 7000.