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FFW Tax Partners give their thoughts to PLC on the Budget

The FFW tax partners once again gave their take on the Chancellor’s Budget to PLC Tax, for publication in their summary of leading practitioners’ views.  Their contributions are set out in full The FFW tax partners once again gave their take on the Chancellor’s Budget to PLC Tax, for publication in their summary of leading practitioners’ views.  Their contributions are set out in full below.

Nick Beecham

"Anyone who used a subsale-based SDLT mitigation scheme, on or after 21 March 2012, will have to consider very carefully whether it has been blocked retrospectively by today’s Budget announcement. If it has, the SDLT will have to be paid (and any return filed, if applicable) by 30 September 2013. Penalties will not be charged provided this deadline is met, although interest will still be charged."

Hartley Foster

"Tackling avoidance remains a key message.


As anticipated, legislation will be introduced in Finance Bill 2013 for a General Anti-abuse Rule to “counteract tax advantages arising from abusive tax avoidance schemes”. The measure will apply to tax arrangements entered into on or after Royal Assent to Finance Bill 2013. It will apply to most taxes in the UK, but not VAT which has its own abuse doctrine. Separate NICs legislation will be introduced after the Royal Assent to Finance Bill 2013, when parliamentary time allows.

No details of any changes to the previously published draft legislation have been indicated; it is likely that the relevant clauses of the Finance Bill will be at least consistent with the December 2012 draft. The effectiveness of the measure will be monitored through, inter alia: "the number of potential GAAR cases identified, how many of those cases are authorised for counteraction under the GAAR with a separate record of cases successfully litigated or settled by agreement using a GAAR challenge." Guidance notes are in the process of being approved by the interim advisory panel.

It will be interesting to see how many cases are authorised for counteraction. This will demonstrate whether HMRC consider that GAAR is a "broad spectrum antibiotic" or, alternatively, is a measure focused on counteracting only the most egregious examples of abusive structures. If the latter, then no cases being authorised for counteraction would demonstrate the effectiveness of the measure (as a deterrent).

Public procurement

A requirement for certification of tax compliance as part of the public procurement process will be introduced, in order to encourage tax compliance by Government suppliers. Any "occasion of non-compliance" needs to be declared and mitigating factors set out. Suppliers will be required to certify only where an occasion of non compliance occurs on or after 1 April 2013, and in respect of tax returns submitted on or after 1 October 2012. Occasions of non-compliance will include:

A tax return being found to be incorrect by reason of (a) the GAAR or (b) the Halifax abuse principle.

The supplier being involved in a failed tax avoidance scheme to which the DOTAS rules applied.

The supplier’s tax affairs having given rise to a criminal conviction for tax related offences which is unspent or to a penalty for civil fraud or evasion.

Foreign economic operators bidding for UK central government contracts will be required to self-certify their tax compliance against the equivalent tax rules, where these exist.


There will be a consultation on whether a Tribunal or court decision in favour of HMRC in an avoidance case should have filing consequences for other taxpayers, with the intention that measures will be included in the Finance Bill 2014. A taxpayer who has used an avoidance structure will be required to consider whether a decision in favour of HMRC in another taxpayer's case means that his return must be amended to reflect that decision. This would impose an ongoing obligation on taxpayers to have regard to jurisprudential developments. This raises a number of issues. Many avoidance cases are fact specific; and it will be difficult to conclude that a tax geared penalty for not taking reasonable care should be imposed on a taxpayer who has undertaken a detailed comparison of the particular facts and circumstances of both cases and concluded (even if erroneously) that the decision in the other case does not apply to him. Secondly, if the decision in the other taxpayer's case is overturned on appeal, must the taxpayer re-re-assess his filing position and amend the return back again?


Section 94, Finance Act 2009 bestowed on HMRC a power to publish details of individuals who are described as "deliberate tax defaulters" (individuals who have received penalties either for deliberate errors in their tax returns or deliberately failing to comply with their tax obligations and the potential lost tax revenue in relation to the penalty exceeds £25,000). HMRC resisted making use of this power until February 2013. In that month, possibly influenced by the urgings of the Public Accounts Committee, and presumably pour encourager les autres, it published the first list. There were 9 individuals "named and shamed", many of whom just scraped over the £25,000 threshold.

The Government indicated that it intends to consult on the naming and shaming of promoters of tax avoidance schemes, with a view to introducing legislation in Finance Act 2014. The impression is that HMRC (perhaps mindful of its duties of confidentiality) is rather more reticent than the Government is regarding the use of this, irretrievably vulgar, 21st century equivalent of the stocks. Whether this power, in time, will become an important weapon in HMRC’s arsenal that is used to ensure that everyone pays their fair share of tax, remains to be seen."

Graeme Nuttall

"The employee ownership business model got a major tax and financial boost in the Budget 2013 announcements. The Government has announced it will introduce a new CGT relief (I would expect this to be a complete exemption from CGT) on qualifying disposals of a controlling interest in a business into an employee-owned structure from April 2014. The Government will provide £50 million annual funding from 2014-15 to support employee ownership, which will include the cost of this relief. The Government has therefore again confirmed its support for employee ownership as envisaged by Sharing Success: The Nuttall Review of Employee Ownership (BIS, 2012). Also, the Government will look at further incentives in this area.

The Chancellor’s 2013 Budget Day statement said: "Employee ownership helps create an enterprise culture. So we’re ... introducing CGT relief for sales of businesses to their employees."

The full detail from the Budget Report is:
"The Government supports employee ownership as a business model and welcomes work by the Implementation Group on Employee Ownership to take forward the recommendations of the Nuttall Review. In order to further incentivise growth of the sector, the Government is providing £50 million annually from 2014-15. This will be used to respond to recommendations from the Nuttall Review and other relevant organisations who aim to encourage employee ownership. It will also be used to fund the introduction of a capital gains tax relief on the sale of a controlling interest in a business into an employee ownership structure. Consultation on this measure will take into account the progress of work by the Department for Business, Innovation and Skills and the Implementation Group to develop an ‘off the shelf’ employee owned company model, with the intention that the new capital gains tax relief will be introduced in Finance Bill 2014. The Government will also look at further incentives in this area, including measures targeted at employees through indirect ownership models."

The new CGT relief will help overcome all the obstacles to promoting employee ownership as identified in the Nuttall Review: it will clearly raise awareness, it will help increase resources by providing a tax relief and will simplify converting an existing business into to employee ownership."

Andrew Prowse

"The cash-strapped Chancellor did not have much room for manoeuvre, leading to the inevitable compromise in which some gained and some lost. Most gains were only modest, but overall it was a reasonable Budget. A Budget "setting free the aspirations of the nation" might be overstating it a bit!

There was the 1% reduction from April 2015 in the main rate of corporation tax, effectively doing away with the small profits rate and marginal relief, achieving "major simplification of our business tax system" (although small companies might be a bit put out that their larger brethren get a reduction while their rate stays the same). On the other hand there was the usual raft of specific (and in the case of SDLT, retrospective) anti-avoidance measures to complicate the business tax system again.

Amidst the changes a couple of stamp duty measures caught the eye.

The more important one, although it may not grab the headlines, is the proposed abolition of the schedule 19 SDRT charge on dealings in UK unit trusts and OEICs from 1 April 2014. Stamp duty has long been perceived as a block on the UK's competitiveness in the international investment funds arena. This proposed abolition, as part of a wider package of positive changes for that sector, is very welcome.

The second change is the proposed abolition, again from April 2014, (subject to consultation) of stamp duty on UK share transactions on AIM and other "growth markets". This is intended to encourage equity investment as an alternative (or addition) to debt finance. It gives AIM and other qualifying markets an advantage over a main listing. Whether it will make a material difference to fundraising and liquidity of itself remains to be seen, but it is a welcome move in the right direction. A broadening of capital gains reliefs (such as entrepreneur's relief) might have a greater impact in this area, but austerity will not allow that - we live in hope (or aspiration)."

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