Employers could have problems getting to grips with the new overly complex regulations regarding employees’ tax avoidance schemes that have been detailed in the Finance Bill, according to tax advisers.
As from yesterday, 6th April, new disguised remuneration legislation came into force. The government hopes to generate £750m per year by clamping down on Employee Benefit Trusts and Employer Funded Retirement Benefit Schemes; both of which are seen as tax avoidance schemes.
The details presented in the Finance Bill run to 59 pages compared to the 25 page original draft which required amendment.
One of the associate partners at Deloitte, Mark Groom, said the coalition had “created a monster”. It’s hard to read and employers will struggle to understand and comply with it. He also raised concerns about the cost of compliance.
Although HMRC has produced a FAQs factsheet to outline the scope of the new legislation, KPMG’s head of employment tax, Jayne Vaughan, says this has clarified some points but added confusion to others. She said HMRC will be inundated with queries on this especially as employers have had next to no time to digest the document before the changes come into force.
Taxpayers are also warned that tougher penalties will now be imposed for people found guilty of hiding money in offshore accounts. Penalties of up to 200% will be levied on anyone caught evading tax in this manner.
HMRC explained that the higher penalties will be imposed on those undertaking tax evasion who under declare income and gains from countries that do not have an automatic tax information sharing agreement with the UK.
The permanent secretary for tax at the Revenue, Dave Hartnett, said the department had made significant progress in tackling international tax evasion and the increased fines should act as a good deterrent against offshore non-compliance.
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