Minister says HMRC 'on the case' on tax avoidance

David Gauke Treasury Minister David Gauke said the government is doing "an awful lot" on tax avoidance

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A Treasury minister has defended HMRC efforts to crack down on tax avoidance, but said there is still more to do.

His comments come after The Times newspaper sent an undercover reporter to a tax seminar which outlined a scheme known as K2.

The newspaper says comedian Jimmy Carr is one of those who uses the scheme, although his lawyers stress he has done nothing wrong.

Mr Gauke said the scheme was already being investigated.

Although perfectly legal, aggressive tax avoidance was attacked by the chancellor in this year's budget as being "morally repugnant" and he has promised to bring in a General Anti-Avoidance Rule.

This follows on from a report, produced last year by tax expert Graham Aaronson QC, which recommended that such a rule would improve HM Revenue and Customs' ability to tackle tax avoidance without damaging the competitiveness of the UK as a place to do business.

'Sales talk'

The Times said K2 was being used to shelter £168 million a year off shore from the taxman.

Under the scheme, an employee resigns from their company and any salary is then paid to an offshore trust. The individual then receives a small amount of that as salary and the rest as a loan which does not attract tax.

Mr Gauke, speaking on BBC Radio 4's World at One, said that based on what he had read in The Times he would describe the K2 scheme as fitting into the chancellor's description of "morally repugnant".

He said: "Where there are arrangements that are artificial, that are contrived, that are not undertaken for any genuine commercial reason, but are purely designed to reduce tax liability, then that is something that we want to address.

"Graham Aaronson has rightly highlighted his proposals for a general anti-abuse rule, which we are taking forward and, actually, the government is doing an awful lot in this area."

He said HMRC had a good compliance record, with yields from clamping down on tax avoidance increasing from £13bn a couple of years ago to an expected £20bn by 2015.

"If you look at international comparisons actually HMRC performs pretty well in terms of yield and the size of the tax gap, but there's more to do," he said.

Responding to secretly recorded footage from the tax seminar, Mr Gauke said there was a certain amount of "sales talk" taking place and it was unclear whether the K2 scheme worked as described.

'Poking fun'

"My understanding is that HMRC were already investigating this particular scheme and, although I don't want to be drawn too much into the specifics, a lot of what has been said about how this scheme operates is the sort of thing that actually doesn't work any more.

"Very often you get these promoters who will be, of course, selling their product... it doesn't always work quite as effectively as they like to make out to their potential clients. So I know HMRC are on the case on this particular matter," he said.

Stephen Williams MP, co-chair of the Liberal Democrat parliamentary Treasury committee expressed "shock" at the report, saying he wanted HMRC to look more closely at the tax affairs of entertainers and sportsmen.

He said: "A lot of these comedians make a substantial amount of their money poking fun at rich people and their practices... I hope the HMRC will have a good look at the tax affairs of many public entertainers and sportsmen as well to make sure they're not indulging in the same schemes."

In a statement, HMRC statement said: "There is no way anyone, no matter who they are, is going to get away with paying less than they should.

"HMRC is extremely effective at shutting down tax avoidance schemes fast and effectively. The avoidance "industry" has been seriously undermined by HMRC's focus on tackling avoidance - preventing billions of pounds of tax being diverted from the Exchequer.

"In our 2010 spending review the Government made £917m available to us to tackle avoidance, evasion and fraud. This is being used to ensure a level playing field for all taxpayers."

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