The government has announced new proposals to crack down on the promoters of contrived and aggressive tax avoidance schemes in order to save billions in tax.

New measures proposed include:

  • Strengthening the Disclosure of Tax Avoidance Schemes (DOTAS) rules
  • Extending HMRC’s powers in obtaining disclosure of scheme users from financial advisers
  • Naming and shaming promoters

The Government is also looking at publishing warnings about tax avoidance schemes that are effectively being mis-sold by "tax cowboys" and making it easier for taxpayers to identify when they are on the receiving end of a hard sell by a less reputable promoter.

Exchequer Secretary to the Treasury, David Gauke, was speaking at the Policy Exchange today, he said:

“Some might say that consultation documents on tax administration are an effective cure for insomnia, but this is one that will keep the promoters of aggressive tax avoidance schemes awake at night.

 “We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill.  These schemes damage our ability to fund public services and provide support to those who need it. They harm businesses by distorting competition. They damage public confidence. And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.”

He listed the type of planning that is not considered abusive.

  • Legitimate use of reliefs
  • Claiming capital reliefs on investment when those reliefs were introduced precisely to encourage the investment in question
  • Claiming reliefs against double taxation when the alternative would be taxpayers paying tax twice on the same income
  • Claiming back tax on legitimate charitable donations
  • Not paying tax on your pension contributions
  • Taking out a tax free ISA.

The type of schemes the government will target include:

  • Buying a house for personal use through a corporate entity to avoid SDLT
  • Channeling money backwards and forwards through complex networks for no commercial reason but to minimize tax
  • Paying loans in lieu of salaries through shell companies
  • Using artificial ‘losses’ deliberately accrued to claim back tax

The consultation "Lifting the lid on tax avoidance schemes" runs until 15 October 2012.