'Cowboy' tax scheme firms 'to disclose client lists'

 
David Gauke David Gauke said the UK had an excellent record on clamping down on avoidance schemes

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The government is promising to force "cowboy" financial firms to disclose the names of people using "aggressive" tax avoidance schemes.

Treasury minister David Gauke said such products were "repugnant" and unfairly penalised ordinary taxpayers.

The proposal is part of a government consultation on curbing avoidance.

Later, Mr Gauke said householders who paid tradesmen in cash were morally wrong as they were "facilitating the hidden economy".

Tuesday's Daily Telegraph quotes Mr Gauke as saying: "Getting a discount with your plumber by paying cash in hand is something that is a big cost to the Revenue and means others have to pay more in tax.

"I think it is morally wrong. It is illegal for the plumber but it is pretty implicit in those circumstances that there is a reason why there is a discount for cash. That is a large part of the hidden economy."

Mr Gauke told Mondays BBC's Newsnight programme: "When a tradesman says 'here's a 10%, a 20% discount on your bill if you pay me cash in hand' that is... as a big a problem in terms of loss to the Exchequer as tax avoidance.

"Revenue is not being paid as it should be paid... If people do that, they have to do so with the recognition that it means taxes will be higher for the rest."

Last month Prime Minister David Cameron condemned the use by comedian Jimmy Carr of a Jersey-based scheme as "morally wrong".

That was one of a number of high-profile cases of people using financial loopholes to legally avoid large tax bills.

The Treasury estimates that 14% of all unpaid tax income is due to aggressive avoidance schemes, which are not illegal but are deemed unfairly to deprive the government of income.

The proposals include:

  • Measures to make finance companies disclose details of wealthy clients who take advantage of such schemes
  • Firms having to disclose how all their tax avoidance schemes work, not just the ones for which they are being criticised
  • Publishing warnings about tax avoidance schemes that are effectively being mis-sold, to make it easier for taxpayers to identify when they are on the receiving end of a hard sell by a disreputable promoter

They comes alongside plans to legislate to curb tax avoidance through a general anti-avoidance rule.

Companies could face fines of more than £1m if they flout the new rules.

Analysis

Don't expect a list of avoiders to be pinned up on the door of your local tax office.

These proposals are aimed at giving HM Revenue and Customs more detail on the individuals using tax avoidance schemes, not as a public shaming exercise.

The tax authority will not publish people's confidential tax affairs.

It already receives a register - often populated by tax agents and company names using these legal schemes.

But, under these plans, HMRC will have a clearer sight of who it is dealing with if it decides to wrestle with the most "aggressive" schemes.

Mr Gauke acknowledged that tax avoidance - which is legal, unlike tax evasion - was difficult to define, adding that there was "always a barrier to be put up between unfairness and clarity".

He defined "aggressive" schemes as those which are "contrived" to defy the will of Parliament by depriving the government of expected revenues. He promised to "strengthen our description" of what constitutes tax avoidance to make schemes easier to control.

In a speech to the Policy Exchange think tank, Mr Gauke said HM Revenue and Customs already had an "excellent compliance record", adding: "We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bill.

"These schemes damage our ability to fund public services and provide support to those who need it. They harm businesses by distorting competition. They damage public confidence.

"And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride."

He promised to deal with "cowboy advisers", who devise and sell schemes to divert money away from the Exchequer.

Mr Gauke told the BBC News Channel: "This is a message to people who might be tempted by an unfair tax avoidance scheme: if something looks too good to be true, it probably is too good to be true.

"It's unfair because other taxpayers are having to pay more as a consequence... We want to nip it in the bud and ensure that people don't get engaged in aggressive tax avoidance schemes."

Mr Carr last month confirmed making a "terrible error of judgement" after it emerged he used a complex scheme to reduce his tax bill.

 

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  • rate this
    +9

    Comment number 627.

    This is a bit rich coming from a Prime Minister whose family has benefited from such measures.

  • rate this
    -1

    Comment number 626.

    Can we please prosecute everyone who pays cash in hand as well. They massively contribute to tax evasion/avoidance. And all those who use Google/Facebook/Amazon/EBay - some of the biggest bunch of corporate fiddlers in Britain. and for that matter everyone who buy/sells at bootfairs.. Oh you mean target tax avoiders/evasion for everyone except them ....

  • rate this
    +2

    Comment number 625.

    Simple solution: generous (£20K) tax-free allowance, thereafter a single, flat tax rate (25% or less) on all forms of income. No exceptions, no deductions except real business expenses, subject to rigorous audit. Now why would this not work - something to do with the large numbers of HRMC staff and "tax consultants" who would be out of jobs??

  • rate this
    -1

    Comment number 624.

    615.Parallel World
    14 Minutes ago
    AndyC555 - I can't figure out whether you are on the next luxury yacht out of here or not Andy :o)
    For those on PAYE, it is probably fair to say 40% + 15% NI + 20% unrecoverable VAT is not far off the 70% mark. I recall someone somewhere said the super rich pay a combined 10%?

    Please let me know how the super rich avoid VAT in shops.

  • rate this
    +3

    Comment number 623.

    "619. AndyC555
    Well, if you're paying 40% tax, you ought to be paying 2% NI. NO ONE is paying 15% NI, so perhaps you should talk to your tax advisor?"
    ________
    I think you may have overlooked the 13.8% employers contribution, which is of course salary you never get to see (and what makes us 'uncompetitive' according to the CBI)

  • rate this
    0

    Comment number 622.

    620. Doctor Bob

    DEPLORABLE! Tax avoidance is not illegal. Why should clients who trusted their affairs to confidentiality be exposed and treated like criminals or tax-evaders.

    If Mr Osborne doesn't like tax avoidance then he needs to change the law, not punish the innocent.
    =
    Looks like doctors are getting paid too much.

  • rate this
    0

    Comment number 621.

    Parallel World "I recall someone somewhere said the super rich pay a combined 10%?"

    I suggest you consign "someone's" view to the same place I put someone somewhere saying benefit scroungers live the life of riley on £40k a year.

    You don't know it for real do you? But it suits your politics to believe it.

  • rate this
    +1

    Comment number 620.

    DEPLORABLE! Tax avoidance is not illegal. Why should clients who trusted their affairs to confidentiality be exposed and treated like criminals or tax-evaders.

    If Mr Osborne doesn't like tax avoidance then he needs to change the law, not punish the innocent. Don't forget if you have an ISA or pension account you're as much a tax avoider as these guys. Osborne will get you next, you bet.

  • rate this
    0

    Comment number 619.

    615 - "For those on PAYE, it is probably fair to say 40% + 15% NI + 20% unrecoverable VAT is not far off the 70% mark."

    Well, if you're paying 40% tax, you ought to be paying 2% NI. NO ONE is paying 15% NI, so perhaps you should talk to your tax advisor?

  • rate this
    +4

    Comment number 618.

    I will believe it when the laws are changed and enacted.
    I dont think Cameron or Osborne have the backbone to follow it through.
    They dont want to upset their Billonaire friends.
    All claptrap and hot air as usual with this Tory led Government.
    Smokescreens a speciality.

  • rate this
    0

    Comment number 617.

    Nigel Lawson had it right. You will never close all the loopholes. All you can do is be brave and reduce tax to a level where it ceases to become worth the trip to avoid it (remember the avoidance schemes are expensive). I believe this was studied and the answer was 38% top rate (hence the 40% rate Lawson introduced). Or we can carry on with the stable door and the horse.

  • rate this
    +3

    Comment number 616.

    @588 'Justin 150'
    ~~
    Sorry, your post is simplistic. Other posters may agree there has always been an invisible cash economy between friends/neighbours and reputable traders.

    It's small beer compared to the massive tax evasion/avoidance rip-off that starves our essential public services in the UK now in the process of being privatised via certain ministers companies based across the pond.

  • rate this
    +2

    Comment number 615.

    AndyC555 - I can't figure out whether you are on the next luxury yacht out of here or not Andy :o)
    For those on PAYE, it is probably fair to say 40% + 15% NI + 20% unrecoverable VAT is not far off the 70% mark. I recall someone somewhere said the super rich pay a combined 10%?

  • rate this
    -2

    Comment number 614.

    The tax departments must be given free access to the billionaires money in those illegal evil tax havens to get a vast amount of money from the trillions of pounds from those wealthy greedy people we have all heard about. They do not need to be that rich.

  • rate this
    +2

    Comment number 613.

    597.AndyC555
    15 Minutes ago

    The fact that he's left the UK must be....er...a bluff.

    ---

    No the empty threat is that he is now paying precisely as much UK tax now, living abroad,as he would be if he were still in living in the UK offshoring his accounts & using tax avoidance mechanisms.

    In real terms it makes no difference to the treasury whether he's resident here or not.

  • rate this
    +2

    Comment number 612.

    Let's so how this will work. You get a letter from HMRC warning you that you're not paying enough tax and that if you don't pay up, the worst they're going to do is name and shame you.

    I'd much rather be named and shamed than pay up because I don't think any of my friends or family would actually care. They'd probably just say "Well done Adam for reducing your tax bill".

  • rate this
    +2

    Comment number 611.

    Simplify the tax system to encourage Tax paying rather than tax avoidance. Make the tax lower and have it for example at 35% highest rate of tax but come down hard on anyone avoiding to pay. This would imply more revenue so no need to have the highest rate at crazy levels making you feel like the government is your business partner and should also encourage growth.

  • rate this
    +7

    Comment number 610.

    Nothing new here. If people break the law then our system is open about this.

    What is not good is identifying people who the government judge to be morally culpable even though they operate within the law.

    It is for politicians & civil servants to make policy which stops abuse, not whinge about it.

  • rate this
    0

    Comment number 609.

    The main problem I see in all this is that if the Government does get all this "avoided" tax back they will only go and waste it instead of reducing the tax burden on the majority.

  • rate this
    0

    Comment number 608.

    "PatBenatar
    It's funny, because there's actually been quite a lot of research into what the optimum top rate of tax is. IIRC, they put it at about 70%"

    Yes, funny. Hilarious. So you'd happily hand over 70% of your earnings? No? Oh, now that IS funny. Funny how it's always 70% of someone else's money that you think should go in taxes, never 70% of your own.

 

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