Chancellor George Osborne is cracking down on wealthy individuals and companies to raise £2 billion in extra taxes lost to offshore financial schemes.
An extra £77 million will go to HM revenue & Customs (HMRC) to beef up the tax man’s fight against offshore avoidance.
The focus is on corporations and the wealthy sheltering their money in offshore financial centres.
Much of the money will be spent on enlarging HMRC’s Affluent Unit – a task force that scrutinises tax returns of the wealthy.
The unit will also look at managing inheritance tax through offshore trusts and financial institutions.
HMRC also wants to establish a centre of excellence to bring together tax and legal experts to review and upgrade how to tackle suspected tax evasion offshore.
The Chancellor hopes to recruit an extra 100 investigators and intelligence analysts to identify taxpayers who might be breaking the rules.
The government also hopes the landmark FATCA (Foreign Account Tax Compliance Act) treaty with the US will generate intelligence about UK taxpayers with holdings and earnings in the States.
Improving HMRC’s highly advanced CONNECT IT systems will also help identify suspected fraudulent transactions and tax management schemes earlier so compliance action can be taken.
HMRC is also targeting tax advisers who devise and sell aggressive offshore tax management schemes to celebrities and other wealthy people.
Change of tactics
“The government is clear that while most taxpayers are doing their bit to help us balance the books, it is unacceptable for a minority to avoid paying their fair share, sometimes by breaking the law,” said the Chancellor.
“We are determined to tackle this problem and HMRC are making good progress, but we are giving them additional tools to bring in more. The action we are announcing today will help HMRC close in not only on those who seek to avoid or evade tax, but on the dubious cowboy advisers who sell them the schemes and dodges they use to cheat the law-abiding majority.”
A clear change of tactic signalled by the Chancellor is attacking accountants and tax advisers running schemes for the wealthy.
By making the climate difficult for them, the market for tax advice narrows and is more controllable by HMRC – but the risk is these advisers will be driven offshore and beyond the clutches of the British government.