Tax Avoidance Schemes

Supplementary written evidence from HM Revenue and Customs

Q358 Stephen Barclay MP to Jim Harra:

In relation to the DOTAS regime, could you provide a breakdown of the various components and a figure for each component for each year between 2004-2010?

1. £12.5 billion represents the aggregate amount of additional forecast tax yield as a result of blocking off avoidance loopholes in legislation from Finance Act 2005 to Finance Act 2010 inclusive.

2. The forecast yield from particular measures is set out at the Budget or other fiscal events, such as the Autumn Statement, that introduces each measure.

3. Full details of the anti-avoidance measure forecasts are attached at Appendix A.

4. Jim Harra explained in his evidence to the Committee on 6 December that the figure needs to be used with care (answer to question 355 - copied below):

Jim Harra: I think some care needs to be used with that figure. If you look at all the legislative measures that have been made in response to it and you look at the revenue protected by those and total that, it will come to £12.5 billion. There is quite a strong argument for saying that, to some extent, you are chasing the same money all the time, because if it is the same avoiders moving from scheme to scheme and you are blocking them, you cannot add all of that up and say that that is all additional money. It is the totality of the revenue protected from all those measures.


Appendix A

Summary of forecast yield for anti avoidance measures by Finance Act

FA 2005

Finance Act

Brief Description of Measure

£ Million
2005-06
indexed

£ Million
2006-07
indexed

£ Million
2007-08
indexed

Sub total (£m)

2005

Remuneration

500

500

500

1,500

2005

Controlled Foreign Companies regime

30

50

80

160

2005

Double tax relief

145

200

200

545

2005

Loans and financial instruments

115

150

150

415

2005

Capital gains

0

70

105

175

2005

Financial products

280

430

430

1,140

2005

Double tax relief

130

200

200

530

2005

Arbitrage

130

200

200

530

2005

Intangible assets

15

25

25

65

2005

Total

1345

1825

1890

5,060

FA 2006

Finance Act

Brief Description of Measure

£ Million
2006-07
indexed

£ Million
2007-08
indexed

£ Million
2008-09
indexed

Sub total

(£m)

2006

Financial: stock lending arrangements

30

30

30

90

2006

Capital gains: capital redemption policies

35

100

75

210

2006

Financial products avoidance

125

135

100

360

2006

CGT

0

40

35

75

2006

Employment related securities

70

65

45

180

2006

Life assurance companies

115

85

85

285

2006

Total

375

455

370

1,200


FA 2007

Finance Act

Brief Description of Measure

£ Million
2007-08
indexed

£ Million
2008-09
indexed

£ Million
2009-10
indexed

Sub total

(£m)

2007

Controlled Foreign Companies Rules: Repeal of Public Quotation Exemption

125

160

160

445

2007

Countering corporation tax avoidance

180

195

195

570

2007

Tackling avoidance using structured finance arrangements

15

15

15

45

2007

Double taxation relief - amendment

0

0

0

-

2007

Stamp Duty Land Tax anti-avoidance

75

70

70

215

2007

Countering CGT avoidance

70

130

120

320

2007

Loss buying

30

45

50

125

2007

Lloyd's corporate members: restriction of group relief

0

0

0

-

2007

Life insurance companies: financing arrangements

120

165

165

450

2007

Employee benefit trusts (EBTs) - closure of an avoidance scheme

0

0

0

-

2007

Tackling Managed Service Companies

350

450

250

1,050

2007

Countering avoidance by financial traders

30

45

50

125

2007

Avoidance by partnerships using sideways loss relief

400

300

60

760

2007

Sale of lessor companies anti-avoidance

0

0

0

-

2007

Total

1395

1575

1135

4,105


FA 2008

Finance Act

Brief Description of Measure

£ Million
2008-09
indexed

£ Million
2009-10
indexed

£ Million
2010-11
indexed

£ Million
2011-12
indexed

Sub total

(£m)

2008

Individuals paying interest in advance: Restriction of loss relief

25

10

0

0

35

2008

Leased plant & machinery

0

0

0

0

-

2008

Corporation Tax - Disguised interest

0

0

0

0

-

2008

Life insurance Companies: Expenses relating to reinsurance arrangements‡

0

20

30

30

80

2008

Industrial and Agricultural Buildings Allowance

0

0

0

0

-

2008

Leased plant & machinery

0

0

0

0

-

2008

Disguising interest

0

55

120

105

280

2008

Controlled foreign companies

0

150

150

100

400

2008

Stamp duty land tax: group relief

0

10

10

10

30

2008

Stamp duty land tax: alternative finance

0

5

*

*

5

2008

Sideways loss relief

0

25

40

15

80

2008

Manufactured payments

0

0

0

0

-

2008

Double taxation treaties - treaty abuse

0

200

40

30

270

2008

Residence & domicile: changes for employment-related securities

0

0

0

0

-

2008

Total

25

475

390

290

1,180

FA 2009

Finance Act

Brief Description of Measure

£ Million
2009-10
indexed

£ Million
2010-11
indexed

£ Million
2011-12
indexed

Sub total

(£m)

2009

Loan relationships - principles based measure

0

0

0

-

2009

Interest relief exploitation

50

0

0

50

2009

FOREX matching targeted anti-avoidance

20

20

20

60

2009

Plant & Machinery leasing avoidance

0

0

0

-

2009

Double taxation relief (DTR) avoidance involving repayment of foreign tax

100

100

200

400

2009

Terminal loss relief

 

 

 

-

2009

Enhance tax avoidance disclosure regime

10

15

10

35

2009

Sub-total

180

135

230

545


FA 2010

Finance Act

Brief Description of Measure

£ Million
2010-11
indexed

£ Million
2011-12
indexed

£ Million
2012-13
indexed

Sub total

(£m)

2010

Financial Products Avoidance - Unauthorised unit trusts

100

100

50

250

2010

Financial Products Avoidance - DTR using MODs

0

75

80

155

2010

Financial Products avoidance - manufactured interest [not Fin Bill]

0

0

0

-

2010

Financial Products avoidance - index-linked gilts

40

65

40

145

2010

Release of loans to participators

15

15

15

45

2010

Plant and machinery - anti-avoidance [a Rev Prot measure]

0

0

0

-

2010

Sale of Lessor Companies - Consortium Arrangements

0

0

0

-

2010

Share Incentive Plans

20

20

20

60

2010

Avoidance based on use of sideways loss relief

0

0

0

-

2010

Terminal loss relief (costings only)

0

0

0

-

2010

Gifts of qualifying investments to charities

15

15

15

45

2010

Reduce opportunities for undesirable SDLT tax planning involving partnerships.

0

0

0

-

2010

Total

190

290

220

700

F(2)A 10

Derecognition of income flows (loan relationships)

0

0

0

-

F(2)A 10

Avoidance using Authorised Investment Funds (AIFs)

0

0

0

-

F(2)A 10

Total

0

0

0

-

F(3)A 10

Life insurance companies (amendment to F(No 2)B 2010)

0

0

0

-

F(3)A 10

Consortium relief

0

0

0

-

F(3)A 10

Total

0

0

0

-

FA 2011

Finance Act

Brief Description of Measure

£ Million
2011-12
indexed

£ Million
2012-13
indexed

£ Million
2013-14
indexed

£ Million
2014-15
indexed

£ Million
2015-16
indexed

Sub total

(£m)

2011

Group mismatch - interim & generic measures.

0

0

0

0

0

-

2011

Disguised remuneration generic & anti forestalling

750

760

730

770

760

3,770

2011

Derecognition

0

0

0

0

0

-

2011

Functional currency (countering avoidance by investment companies)

60

60

60

60

60

300

2011

Sale of lessor companies - preventing avoidance

25

20

20

15

15

95

2011

SDLT anti-avoidance

30

30

40

40

50

190

2011

Plant & Machinery leasing: anti-avoidance

80

130

130

120

120

580

2011

Substantial donors to charities

-10

-10

-10

-10

-10

50

2011

Total

935

990

970

995

995

4,885


FA 2012

Finance Act

Brief Description of Measure

£ Million
2012-13
indexed

£ Million
2013-14
indexed

£ Million
2014-15
indexed

£ Million
2015-16
indexed

£ Million
2016-17
indexed

Sub total

(£m)

2012

Life Insurance - earlier gains avoidance

0

0

0

0

0

-

2012

Changes to the Disregard Regulations

0

0

0

0

0

-

2012

SDLT Sub-sales avoidance

neg

neg

neg

neg

neg

-

2012

EU Reasoned Opinion - Section 13

 

 

 

 

 

-

2012

IHT Avoidance: Interests in Offshore Trusts

neg

0

0

0

0

-

2012

Inheritance tax & spouse relief

0

neg

-5

-5

-5

- 15

2012

IHT avoidance: settlor interested trusts

0

15

10

10

10

45

2012

Tax avoidance: Manufactured Overseas Dividends

30

40

40

40

40

190

2012

Plant and machinery leasing

25

40

40

35

35

175

2012

Sale of lessor companies - protecting revenue

0

0

0

0

0

-

2012

Debt buybacks

395

210

55

0

0

660

2012

Property Income Sideways Loss relief

0

0

0

0

0

-

2012

Higher rate for corp bodies purchasing residential

neg

65

65

65

75

270

2012

Retrospective SDLT anti-avoidance

statement

 

 

 

 

-

2012

Review of high risk areas of the tax code: taxation

Consultation

 

 

 

 

-

2012

Review of high risk areas of the tax code

Consultation

 

 

 

 

-

2012

SDLT non-legislative anti-avoidance measures

Operational response

 

 

 

 

-

2012

Anti-avoidance - corporate investors in Authorised

0

0

0

0

0

-

2012

SDLT avoidance sub-sale scheme consultation

Consultation

 

 

 

 

-

2012

CGT Change to anti-avoidance rules

0

neg

neg

neg

-5

- 5

2012

Total

450

370

205

145

150

1,320

Yearly Totals

Finance  Act

£ Million
2005-06
indexed

£ Million
2006-07
indexed

£ Million
2007-08
indexed

£ Million
2008-09
indexed

£ Million
2009-10
indexed

£ Million
2010-11
indexed

£ Million
2011-12
indexed

£ Million
2012-13
indexed

£ Million
2013-14
indexed

£ Million
2014-15
indexed

£ Million
2015-16
indexed

£ Million
2016-17
indexed

Total

(£m)

2005

Sub-total

1345

1825

1890

 

 

 

 

 

 

 

 

 

5,060

2006

Sub-total

 

375

455

370

 

 

 

 

 

 

 

 

1,200

2007

Sub-total

 

 

1395

1575

1135

 

 

 

 

 

 

 

4,105

2008

Sub-total

 

 

 

25

475

390

290

 

 

 

 

 

1,180

2009

Sub-total

 

 

 

 

180

135

230

 

 

 

 

 

545

2010

Sub-total

 

 

 

 

 

190

290

220

 

 

 

 

700

F(2)A 10

Sub-total

 

 

 

 

 

0

0

0

0

0

 

 

-

F(3)A 10

Sub-total

 

 

 

 

 

0

0

0

0

0

 

 

-

Cumulative Total 2005 – 2010 =

12,790

2011

Sub-total   

 

 

 

 

 

 

935

990

970

995

995

 

4,885

2012

Sub-total

 

 

 

 

 

 

 

450

370

205

145

150

1,320

Q371: Chair to Lin Homer: Personal Service Companies

As previously discussed, HMRC has strengthened its specialist compliance teams to more effectively address the use of personal service companies to disguise what would otherwise be an employment relationship. These teams focus on the enforcement of the intermediaries legislation, commonly referred to as IR35, ensuring that there is no tax lost in these types of arrangements. The legislation does not outlaw the use of personal service companies as they are often legitimate commercial arrangements.

Separately, the department undertakes work with end user/clients of labour to encourage them to undertake due diligence tests to ensure the validity of the supply chain.  HMRC makes sure that big businesses are aware of the potential financial and reputational risks that may arise if they have not ensured their supply chain and it is found that they are engaging a company that is involved in avoidance.

As many of these arrangements involve legitimate commercial arrangements, it is beyond the remit of HMRC to be able to tell businesses that they should not enter into them, or encourage their use if appropriate.  HMRC will offer advice on the tax consequences for businesses of the decisions they make.

Lin Homer

Permanent Secretary

17 December 2012

Prepared 31st December 2012