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UK Budget 2014 – new tax anti-avoidance measures announced

New measures have been announced as part of the UK budget on 17 March 2014 which may impact banks and other taxpayers disclosing under the disclosure of tax avoidance schemes (DOTAS) rules.

Since 2004, under DOTAS, promoters of certain tax-advantaged arrangements which are made available to taxpayers must make a disclosure to the UK tax authorities (HMRC).

The taxpayer must then include a DOTAS number in their tax return. Where a DOTAS disclosure is made, HMRC will now have the power to issue an accelerated payment notice requiring the taxpayer to pay up-front the tax which is purportedly saved by the arrangements. HMRC can issue a notice whenever it enquires into a tax return, or if there is an appeal against a decision of HMRC. Taxpayers receiving a notice will have 90 days to ask HMRC to reconsider its decision, or to pay the tax (with a further 30 days to pay where HMRC confirms the notice). The rules will apply both to new disclosures made after Royal Assent of the Finance Bill 2014 (expected in mid-July 2014), and to disclosures which were made before that date. HMRC will publish in advance a list of disclosures made before this date for which HMRC intends to issue a notice. HMRC will also have the power to issue a notice to taxpayers entering into abusive tax arrangements within the scope of the UK's general anti-abuse rule or tax-advantaged transactions which HMRC determines have been counteracted by a court judgment in another case.

The Finance Bill 2014 also contains a requirement for HMRC to issue an annual report listing those banks which are signatories to the code of conduct on the taxation of banks (the code). Banks which sign up to the voluntary code agree to follow certain specified guidelines as to their dealings and communications policy with HMRC and undertake not to promote or enter into certain tax-advantaged arrangements which are contrary to the intentions of Parliament. Although the code will remain voluntary, banks must confirm to HMRC that they will comply with the provisions of the code. Those banks that do not agree to be bound by the code will be noted as such in each annual report. Further, subject to certain safeguards, banks which breach the provisions of the code will be named in the annual report. The first annual report will be published before the end of 2015. HMRC has also published a governance protocol which describes the basis on which HMRC will operate, and deal with alleged breaches of the code.

To read more about these measures and others announced as part of the budget, you may be interested in our 2014 budget alert:

Legal and Regulatory Risk Note
United Kingdom