New measures to try and prevent corporate tax avoidance have been announced by the Treasury today.
It is expected that the measures will raise over £2bn in extra revenue over the course of the next four years.
With immediate effect, companies will no longer be allowed to use loans to other companies within the same group to reduce the group’s tax bill and companies will be more liable to include loans within its accounts.
There will be further legislation introduced shortly which will prevent disguised remuneration, stop investors retrospectively changing the currency they prepare their accounts in, and make it more difficult for businesses to split the supply of services with the aim of reducing VAT.
Furthermore, Graham Aaronson QC has been asked to lead a study into the viability, effectiveness and attractiveness – for government and for businesses – of a General Anti Avoidance Rule (GAAR).
The GAAR, mooted by the Labour Party 1997 but dropped after pressure from the accountancy industry, is a set of guidance principles which would allow governments and courts more scrutiny of of accounts and the ability to act more subjectively when ruling on what constitutes tax avoidance.
In today’s announcement, David Gauke, Exchequer Secretary to the Treasury, said the introduction of the GAAR would be made only if it helped towards creating a more stable and predictable tax system and no introduction would be made without further public consultation.