KPMG CI Comments on Autumn Statement

The Chancellor of the Exchequer delivered his Autumn Statement on 5 December 2012. As anticipated, the draft legislation affecting non-natural persons holding UK residential property with a value in excess of £2 million will follow on 11 December 2012. However, there are a number of other announcements of potential local interest.

• “Closing in on tax evasion “– HMRC issued a report on 3 December 2012 which outlined their increased commitment to targeting tax evasion and the extra expenditure to be spent in this area. This report follows the signing of the UK/Swiss Cooperation Agreement which is due to come into force on 1 January 2013, and the recent agreement between the UK and the US which was signed in September 2012 and will significantly increase the amount of tax information automatically exchanged between the US and the UK. The Government has confirmed that it will “look to conclude similar agreements with other jurisdictions”. This is clearly a reference to the so-called “son of FATCA” and we will no doubt be hearing much more about this in coming months. In addition, HMRC will be publishing their “comprehensive strategy to tackle offshore tax evasion“ in Spring 2013.

• Abusive use of partnerships – The Chancellor announced that HMRC would be investigating “abusive use of partnerships”. Although he has not expanded on this point, a number of the proposed new methods of holding residential property involve partnerships such as LLPs.

• Offshore capability building – HMRC will “establish a new centre of excellence on offshore evasion, aimed at building HMRC's offshore capability, making better use of HMRC data to identify tax evaders, reviewing HMRC's legal powers in this area and developing a more proactive approach to international engagement to tackle evasion”.

• Personal tax avoidance and evasion – The Government will increase HMRC's resources to “tackle offshore evasion and avoidance of inheritance tax using offshore trusts, bank accounts and other entities”. There is no further detail on this point.

• Offshore employment intermediaries – HMRC is to conduct a review of offshore employment intermediaries perceived to be used to avoid tax and NICs. An update will be provided in Budget 2013.

• Transfer pricing – The Government say they are “leading the international effort to prevent artificial transfers of profits to tax havens.” They have asked the OECD to take this work forward and “will make it an important priority of our G8 Presidency next year”.

• HMRC's “CONNECT” system – in February 2013, HMRC will be adding data from banks and financial institutions on financial transactions, where a risk has been identified, to HMRC's CONNECT system “providing another new way to spot those trying to hide their income and wealth in order to evade paying tax.”

• Introduction of the UK's first ever General Anti-Abuse Rule – Guidance and draft legislation will be published later this month.

• Tax avoidance schemes – Government is to consult over the introduction of significant new information disclosure and penalty powers to target the promoters of aggressive tax avoidance schemes.