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Autumn Statement 2013 reaction: Corporate Tax & HMRC Powers

The Chancellor has closed his red box for another year, and so in this edition of Baker Tilly’s weekly round-up of the most important tax news, we give our thoughts and opinions on Autumn Statement 2013.

With much more work to be done to repair the UK economy after the worst financial crisis for many generations, and an election to be fought in 2015, there’s a wide range of tax proposals to give relief where it’s felt to be due and impose extra taxes on others.

The trend of reducing business taxes to boost the economy is set to continue, with the burden of taxes paid by individuals increasing to reflect this. As a result, the “bottom” 30% and the “top” 10% of UK households will be worse off in 2014/15, with the middle 60% unchanged or better off.

The Chancellor had anti-avoidance firmly on his radar as he announced one of the biggest package of measures to clamp down on tax avoidance, which could raise over £9bn.

Around 65,000 unresolved tax avoidance cases – most dating back to before 2010 - has built up, and currently there’s no incentive for users of these schemes to settle their case as they can hold onto the tax while matters remain unresolved. So Mr Osborne has announced he is to bring in ‘follower penalties’, meaning if somebody loses an appeal in a similar case then every taxpayer who using that sort of tax-avoidance scheme will have to pay the tax, and will only get it returned if successful in their appeal. This could bring forward around £800m of tax which might otherwise not have been payable for years.

This is a sensible measure – but the detail will be extremely important as it may mean people will end up paying tax which is not legally due.

More welcome news in that the government is not to proceed with further changes to the regime for loans made by private companies to their shareholders. Changes made last year have still not bedded down, and further changes would just have added additional confusion and complication. It is good that government can sometimes be persuaded to change its mind.

The creative sector was also given a welcome boost with news of a consultation on a limited form of tax relief for touring theatres. The tax system has been used with great effect to help the UK film industry and it make sense to use that experience to support live theatre. But the detail will be important, as some previous attempts to use the tax system to help the creative industries have run into problems over tax avoidance and it would be unfortunate if this new relief were to be ‘avoidance proofed’ to such an extent that it became unusable in practice.

Finally, many people assumed there would be mention of the perceived abuses of the international tax system by multinational companies. But despite a few minor amendments to the corporate tax regime, there were no fundamental changes. Everybody acknowledges the need for reform, but immediate knee-jerk changes are not the answer and the programme of work to address this should be allowed to continue to give time to get the system properly fit for purpose.

This was posted in Bdaily's Members' News section by Baker Tilly .