It was clear from the Budget that George Osborne is getting tough on tax avoidance, promising a further drive to tackle “morally repugnant” tax evasion and aggressive tax avoidance.
Within the Budget we saw a big move to stamp out stamp duty avoidance schemes.
Over the past few years we have been regularly approached by some accountants who use company structures to exploit a loophole in the stamp duty rules.
The Budget introduced a 15% charge on homes costing more than £2m that are bought through a company. It also introduced a new rate of stamp duty at 7% on property purchases over £2m.
The Treasury also plans to consult on introducing a ‘large annual charge’ on £2m homes that have already been purchased through companies.
These measures send a clear message to those who have tried to avoid stamp duty that the loophole is closed and they will inevitably pay for their original tax avoidance attempt.
Osborne also promised to introduce a General Anti Avoidance Rule (GAAR) next year.
This idea was first consulted on in December 2010 and is intended to crack down on complex and convoluted tax avoidance schemes, often promoted by big accountancy firms to large corporate clients.
Such a GAAR, when introduced, also risks undermining the types of sensible and reasonable tax planning that individual investors often undertake. We look forward to seeing more details on this proposal ahead of its introduction.
Another measure introduced as a result of the Budget is an annual limit on uncapped tax reliefs.
This will be applied to anyone claiming over £50,000 of tax reliefs each year and will be set at 25% of income, or £50,000 if lower.
We understand that this tax relief cap has been introduced primarily to target those who establish a loss-making business in order to claim tax relief. It will apply to all uncapped tax reliefs, including loss relief against total income, qualifying loan interest and Gift Aid.
Subject to consultation, this cap will be applied to claims for tax relief on or after 6th April 2013.
Photo credit: Flickr/Kusadasi-Guy
