Film schemes
The legislation concerning film schemes, for example, has changed in an attempt to ensure that the beneficial tax relief is used as intended – to incentivise projects in the UK film industry. This is after they were being used as a means of generating artificial tax losses to offset against taxable income and/or gains in the hands of third parties.
This does not mean that the schemes before were not avoidance, but that the avoidance was not robustly challenged. For more than a decade, the statistics published in the UK show that more than 80 per cent of cases taken through the courts are being decided in HMRC’s favour. Despite this, many avoidance schemes flourished.
For numerous reasons, the future of mass-marketed tax avoidance schemes might be finite, due largely to the introduction of the Disclosure of Tax Avoidance Schemes regime in 2003. This means mass-marketed schemes and arrangements that seek to exploit a loophole in the legislation must be reported to HMRC, putting it in a much better position to react more quickly.
Further disincentives introduced in recent years include the naming and shaming of promoters of such schemes, reputational damage for serial avoiders and new legislation. These included both targeted and general anti-avoidance rules, to help catch particularly abusive transactions.
Furthermore, the government has recently sought to deprive people of any cash flow benefits of entering into avoidance schemes. It has done this with accelerated payment notices and follower notices demanding that any tax is paid up front, even where the scheme’s effectiveness might still be the subject of a dispute. Other disclosure facilities are now closed/closing, and tax-geared penalties for failing to report offshore assets can be up to 300 per cent of the tax due.
In addition, since 2010, the government has invested an additional £1.8bn to help tackle tax evasion, avoidance and non-compliance. One of the latest weapons is the introduction of two corporate strict liability offences for the failure to prevent tax evasion by employees, agents or other persons performing services for the corporate. This is part of a move by the UK to shift responsibility for enforcement and compliance to corporates themselves. With unlimited financial fines and no de minimis limits, this piece of legislation cannot be ignored.
