Journal :: Changes to the New Tax Avoidance Reporting Regulations

Published: July 19, 2004
Author: Graham Dragon
Category: Tax
Permalink: Changes to the New Tax Avoidance Reporting Regulations

Earlier in the month I issued a couple of bulletins outlining my interpretation of the implications of the proposed Tax Avoidance Reporting Regulations.

This week, Inland Revenue has announced a number of changes to the Regulations, following consultation with the industry.

It now appears Inland Revenue recognises that the original Regulations were far too widely drafted, and would have included the requirement to report far more ?schemes? than the Revenue actually wanted. In particular, the rigid use of a formula to calculate whether there is an overall cashflow benefit to a taxpayer is now to be scrapped. In its place we can expect clearer definitions of the types of scheme which are regarded as ?abusive?.

Another significant change is that none of us now need worry that while we are on holiday in the first two weeks of August a reporting deadline will pass and we will return to face a ?5,000 fine for not reporting something we didn?t even know was supposed to be reported! The original Regulations would have included a requirement to report arrangements involving financial products which were discussed with clients after 18th March 2004 ? and these would have had to be reported within the first week of August even though the Regulations would not be laid before Parliament until some time in late July, and we might therefore not have had the chance to see the final version before going on vacation.

In the case of financial products, the revised Regulations will only apply to advice given since 22nd June, and will extend the reporting deadline to 31st October. Advice on ?Schemes? involving employment related products will still have to be reported if it was given after 18th March, but again can be delayed until up to the end of October.

Inland Revenue still have until the end of June to receive further feedback on the Regulations, so we do not yet have the definitive version which will be laid before Parliament in July. When this version is published I will send out a further bulletin giving my interpretation of its impact on the advice we are likely to be giving to clients. However, my expectation is that it will allow us to continue giving unfettered advice on the various ?tax mitigation? solutions most of us use ? e.g. pensions, VCTs, EIS etc ? whilst attacking most of the ?tax avoidance? solutions favoured by some of the more creative tax planning accountancy practices.

As I have said in previous bulletins, perhaps now is the time for us to focus on tax mitigation rather than tax avoidance.

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About Graham Dragon

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