Risk & Economy » Tax » Brown shuts tax loopholes.

Brown shuts tax loopholes.

Gordon Brown has held back, for now, from the sledgehammer approach of introducing a general anti-avoidance rule (GAAR). But other tax wheezes were still hammered in the Budget. On the Corporation Tax side, the Chancellor has clamped down on the diversion of income to controlled foreign companies in tax havens, as well as a dodge involving offshore companies when selling a subsidiary. Reverse premiums paid by landlords to induce tenants to take out a lease are also now taxable. Tax advisers consider that ending these options is a fair response. A less predicted move was the extension of the scope of employers’ NICs to cover all benefits in kind from April 2000. “This will prove very expensive for employers with relatively senior people,” said Sheena Sullivan, tax partner at Pannell Kerr Forster. Sullivan is also concerned by the tweaking of the CTSA regime to introduce penalties where companies fail to provide adequate explanations to the Inland Revenue for fluctuations in estimated profits and quarterly tax payments. The Revenue has not yet defined what it considers to be adequate explanations. “The uncertainty is a real problem,” said Sullivan. Iain Stewart, corporate tax partner at KPMG, is disappointed by the Chancellor’s stamp duty changes. Previously, companies buying a business could avoid duty by travelling abroad to sign the documents and keeping them overseas. Now, interest on the duty will arise 30 days after they are signed, wherever that is. Confusingly, liability for the duty only arises 14 days after documents are brought into the UK. The banking community has been particularly hard hit by the decision to redefine the scope of VAT exemption relating to financial intermediary services, which will now include many back office functions. “The banks had believed that these activities were exempt and outsourced many of them,” says Stewart. “Now, because in the main they cannot recover VAT, the outsourced services will effectively have an 17.5% increase in price.”

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