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2006
BUDGET REPORT SUMMARY
Anti-Avoidance
Measures
Tax schemes
In 2004 new
disclosure rules were introduced in relation to certain
tax schemes. Broadly the rules require ‘promoters’ to
provide details of their schemes to HMRC shortly after the
scheme is sold. The government now intends to:
-
extend
the regime to income tax, capital gains tax and
corporation tax
-
replace
the ‘filters’ for direct tax with ‘hallmarks’
in line with the system for VAT
-
require
businesses (other than SMEs) to provide information on
direct tax schemes and arrangements devised
‘in-house’ within 30 days, bringing them more in
line with the rules for scheme promoters.
The changes
will be effective from 1 July 2006.
Sale of
lessor companies
Groups of
companies have benefited from capital allowances in the
early years of a lease, before selling lessor companies to
loss-making groups, thereby avoiding paying tax on the
subsequent profits.
Small changes will be made to the measure introduced from
5 December 2005 which imposes a charge on the lessor
company to recover the tax benefits that have been taken
but grants an equal relief on the day after the sale.
VAT
measures
There are a
variety of measures to be introduced in respect of VAT
including:
-
powers
to allow HMRC to direct that an individual business be
required to keep specified additional records in
respect of goods such as mobile phones and computer
chips
-
measures
affecting businesses which seek to avoid VAT on phone
cards and other face value vouchers
-
stepping
up activities in an attempt to tackle Missing Trader
Intra-Community VAT fraud
-
clarification
of powers relating to inspection of goods
-
informal
consultation on a proposed change to the partial
exemption rules where approval is sought for a special
method.
Other
measures
A number of
further measures will be introduced including some changes
to those announced in the Pre-Budget Report:
-
minor
amendments are to be made to the legislation and
guidance in respect of corporate capital losses. The
rules were introduced with effect from 5 December 2005
to ensure that such losses can only be created and
used as a result of genuine commercial transactions
rather than to gain a tax advantage
-
legislation
will ensure that rewards obtained from avoidance
schemes using options over employment-related
securities will be subject to PAYE and NIC. This
measure will apply with effect from 2 December 2004
when the government made the original statement
regarding such schemes
-
a
measure to ensure that individuals and trustees cannot
exploit the ‘bed and breakfasting’ rules in
respect of capital gains
-
legislation
will be introduced to block a variety of arrangements
entered into by companies which involve financial
products that are designed to avoid tax
-
a
measure to ensure that some companies which became
non-resident in the UK as the result of a double
taxation treaty before 1 April 2002 are brought within
the controlled foreign companies legislation. This
will have effect from 22 March 2006
-
further
details are available on the government’s strategy
to tackle tobacco smuggling
-
as part
of their review of tax and NICs the government will
consult on action to tackle disguised employment
through managed service company schemes
-
three
provisions will be introduced to prevent the
exploitation of tax relief on certain donations to
charitable bodies.
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