One Step Forward, One Step Back

By Global Tax Weekly

It was so often the case, under the UK coalition Government, that Britain took one step forwards, and then one step back. Nothing seems to have changed now that the Conservative Party is governing outright. The UK has won plaudits from investors for the scale of the corporate tax cuts that have taken place since 2010, and there will be more to come over the course of the current parliament with the rate due to fall below 20 percent, which seems to be something of a psychological marker these days, separating the mainstream economies from the “tax havens.” Yet the Exchequer needs tax revenues, and needs them badly if the budget deficit is to be eliminated, and public debt, which has risen to 80 percent of gross domestic product, at last put on a downward track. Consequently, HM Revenue and Customs has been handed some sweeping powers to collect back taxes. As I always say in this column, tax evaders deserve to feel the full force of the law. However, there has to be checks and balances in the system, and those accused of a crime should — if a country claims to be civilized — be entitled to a fair hearing. This no longer seems to be the case if HMRC suspects you might be playing fast and loose with the UK’s tax laws. Now, HMRC takes the money it thinks it is owed first and asks questions later, as with the Accelerated Payments Notice regime, which was upheld by the High Court last week following a judicial review. Now HMRC is consulting taxpayers on a proposed new law that will create a new criminal offence for facilitating tax evasion. This is designed to ensure that corporations can be held accountable under the criminal law for failing to prevent their agents from facilitating tax evasion, which, on the surface, sounds reasonable enough. However, the proposed legislation is extremely broad geographically, with foreign corporations, as well as UK ones, falling within its scope. It is unclear how HMRC will enforce the law, but companies are probably going to wonder whether it is worth the additional administrative hassle and risk to their reputation to do business in the UK, low taxes or not.

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