Tax avoidance

Changes to the disclosure regime

The rules requiring disclosure of the creation, marketing and use of tax avoidance schemes will be extended to include the whole of income tax, corporation tax and capital gains tax. The existing criteria for schemes to be disclosed will be replaced by a requirement based on hallmarks, on similar lines to the VAT disclosure rules. The time limit for disclosure of schemes devised in-house will be reduced to 30 days from the implementation of the scheme, but individuals and SMEs will no longer have to disclose in-house schemes. The changes take effect from 1 July 2006.

Financial products – anti-avoidance

A range of measures have been introduced to counter corporate tax avoidance. These include schemes based on stock lending on non-commercial terms, schemes involving the purchase and sale of distribution rights on shares and schemes using intra-group arrangements. The measures take effect from various dates between 5 December 2005 and 22 March 2006.

Charities

Measures effective from 22 March 2006 will restrict the scope for large donors to receive benefits from a charity after tax relief has been granted on a donation. They also strengthen the provisions that withdraw tax relief where charitable funds are used for non-charitable purposes. A further change from 1 April 2006 will extend to non-close companies the rules that restrict the benefits they can receive in return for a donation to charity.

International tax enforcement

The UK will have the power to enter into international agreements for mutual assistance in the enforcement of indirect taxes, from the date of Royal Assent. There are already such powers for direct taxes.