Public Accounts CommitteeSupplementary written evidence from HM Revenue and Customs
Q358 Stephen Barclay MP to Jim Harra:
In relation to the DOTAS regime, could you provide a breakdown of the various components and a figure for each component for each year between 2004–2010?
1. £12.5 billion represents the aggregate amount of additional forecast tax yield as a result of blocking off avoidance loopholes in legislation from Finance Act 2005 to Finance Act 2010 inclusive.
2. The forecast yield from particular measures is set out at the Budget or other fiscal events, such as the Autumn Statement, that introduces each measure.
3. Full details of the anti-avoidance measure forecasts are attached at Appendix A.
4. Jim Harra explained in his evidence to the Committee on 6 December that the figure needs to be used with care (answer to question 355—copied below):
Jim Harra: I think some care needs to be used with that figure. If you look at all the legislative measures that have been made in response to it and you look at the revenue protected by those and total that, it will come to £12.5 billion. There is quite a strong argument for saying that, to some extent, you are chasing the same money all the time, because if it is the same avoiders moving from scheme to scheme and you are blocking them, you cannot add all of that up and say that that is all additional money. It is the totality of the revenue protected from all those measures.
APPENDIX A
SUMMARY OF FORECAST YIELD FOR ANTI AVOIDANCE MEASURES BY FINANCE ACT
FA 2005
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2005 |
Remuneration |
500 |
500 |
500 |
1,500 |
|
2005 |
Controlled Foreign Companies regime |
30 |
50 |
80 |
160 |
|
2005 |
Double tax relief |
145 |
200 |
200 |
545 |
|
2005 |
Loans and financial instruments |
115 |
150 |
150 |
415 |
|
2005 |
Capital gains |
0 |
70 |
105 |
175 |
|
2005 |
Financial products |
280 |
430 |
430 |
1,140 |
|
2005 |
Double tax relief |
130 |
200 |
200 |
530 |
|
2005 |
Arbitrage |
130 |
200 |
200 |
530 |
|
2005 |
Intangible assets |
15 |
25 |
25 |
65 |
|
2005 |
Total |
1345 |
1825 |
1890 |
5,060 |
FA 2006
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2006 |
Financial: stock lending arrangements |
30 |
30 |
30 |
90 |
|
2006 |
Capital gains: capital redemption policies |
35 |
100 |
75 |
210 |
|
2006 |
Financial products avoidance |
125 |
135 |
100 |
360 |
|
2006 |
CGT |
0 |
40 |
35 |
75 |
|
2006 |
Employment related securities |
70 |
65 |
45 |
180 |
|
2006 |
Life assurance companies |
115 |
85 |
85 |
285 |
|
2006 |
Total |
375 |
455 |
370 |
1,200 |
FA 2007
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2007 |
Controlled Foreign Companies Rules: Repeal of Public Quotation Exemption |
125 |
160 |
160 |
445 |
|
2007 |
Countering corporation tax avoidance |
180 |
195 |
195 |
570 |
|
2007 |
Tackling avoidance using structured finance arrangements |
15 |
15 |
15 |
45 |
|
2007 |
Double taxation relief—amendment |
0 |
0 |
0 |
— |
|
2007 |
Stamp Duty Land Tax anti-avoidance |
75 |
70 |
70 |
215 |
|
2007 |
Countering CGT avoidance |
70 |
130 |
120 |
320 |
|
2007 |
Loss buying |
30 |
45 |
50 |
125 |
|
2007 |
Lloyd’s corporate members: restriction of group relief |
0 |
0 |
0 |
— |
|
2007 |
Life insurance companies: financing arrangements |
120 |
165 |
165 |
450 |
|
2007 |
Employee benefit trusts (EBTs)—closure of an avoidance scheme |
0 |
0 |
0 |
- |
|
2007 |
Tackling Managed Service Companies |
350 |
450 |
250 |
1,050 |
|
2007 |
Countering avoidance by financial traders |
30 |
45 |
50 |
125 |
|
2007 |
Avoidance by partnerships using sideways loss relief |
400 |
300 |
60 |
760 |
|
2007 |
Sale of lessor companies anti-avoidance |
0 |
0 |
0 |
— |
|
2007 |
Total |
1395 |
1575 |
1135 |
4,105 |
FA 2008
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2008 |
Individuals paying interest in advance: Restriction of loss relief |
25 |
10 |
0 |
0 |
35 |
|
2008 |
Leased plant & machinery |
0 |
0 |
0 |
0 |
— |
|
2008 |
Corporation Tax—Disguised interest |
0 |
0 |
0 |
0 |
— |
|
2008 |
Life insurance Companies: Expenses relating to reinsurance arrangements‡ |
0 |
20 |
30 |
30 |
80 |
|
2008 |
Industrial and Agricultural Buildings Allowance |
0 |
0 |
0 |
0 |
— |
|
2008 |
Leased plant & machinery |
0 |
0 |
0 |
0 |
— |
|
2008 |
Disguising interest |
0 |
55 |
120 |
105 |
280 |
|
2008 |
Controlled foreign companies |
0 |
150 |
150 |
100 |
400 |
|
2008 |
Stamp duty land tax: group relief |
0 |
10 |
10 |
10 |
30 |
|
2008 |
Stamp duty land tax: alternative finance |
0 |
5 |
* |
* |
5 |
|
2008 |
Sideways loss relief |
0 |
25 |
40 |
15 |
80 |
|
2008 |
Manufactured payments |
0 |
0 |
0 |
0 |
— |
|
2008 |
Double taxation treaties—treaty abuse |
0 |
200 |
40 |
30 |
270 |
|
2008 |
Residence & domicile: changes for employment-related securities |
0 |
0 |
0 |
0 |
- |
|
2008 |
Total |
25 |
475 |
390 |
290 |
1,180 |
FA 2009
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2009 |
Loan relationships—principles based measure |
0 |
0 |
0 |
— |
|
2009 |
Interest relief exploitation |
50 |
0 |
0 |
50 |
|
2009 |
FOREX matching targeted anti-avoidance |
20 |
20 |
20 |
60 |
|
2009 |
Plant & Machinery leasing avoidance |
0 |
0 |
0 |
— |
|
2009 |
Double taxation relief (DTR) avoidance involving repayment of foreign tax |
100 |
100 |
200 |
400 |
|
2009 |
Terminal loss relief |
|
|
|
— |
|
2009 |
Enhance tax avoidance disclosure regime |
10 |
15 |
10 |
35 |
|
2009 |
Sub-total |
180 |
135 |
230 |
545 |
FA 2010
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2010 |
Financial Products Avoidance—Unauthorised unit trusts |
100 |
100 |
50 |
250 |
|
2010 |
Financial Products Avoidance—DTR using MODs |
0 |
75 |
80 |
155 |
|
2010 |
Financial Products avoidance—manufactured interest [not Fin Bill] |
0 |
0 |
0 |
— |
|
2010 |
Financial Products avoidance—index-linked gilts |
40 |
65 |
40 |
145 |
|
2010 |
Release of loans to participators |
15 |
15 |
15 |
45 |
|
2010 |
Plant and machinery—anti-avoidance [a Rev Prot measure] |
0 |
0 |
0 |
— |
|
2010 |
Sale of Lessor Companies—Consortium Arrangements |
0 |
0 |
0 |
— |
|
2010 |
Share Incentive Plans |
20 |
20 |
20 |
60 |
|
2010 |
Avoidance based on use of sideways loss relief |
0 |
0 |
0 |
— |
|
2010 |
Terminal loss relief (costings only) |
0 |
0 |
0 |
— |
|
2010 |
Gifts of qualifying investments to charities |
15 |
15 |
15 |
45 |
|
2010 |
Reduce opportunities for undesirable SDLT tax planning involving partnerships. |
0 |
0 |
0 |
— |
|
2010 |
Total |
190 |
290 |
220 |
700 |
|
F(2)A 10 |
Derecognition of income flows (loan relationships) |
0 |
0 |
0 |
— |
|
F(2)A 10 |
Avoidance using Authorised Investment Funds (AIFs) |
0 |
0 |
0 |
— |
|
F(2)A 10 |
Total |
0 |
0 |
0 |
— |
|
F(3)A 10 |
Life insurance companies (amendment to F(No 2)B 2010) |
0 |
0 |
0 |
— |
|
F(3)A 10 |
Consortium relief |
0 |
0 |
0 |
— |
|
F(3)A 10 |
Total |
0 |
0 |
0 |
— |
FA 2011
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
Sub total (£m) |
|
2011 |
Group mismatch—interim & generic measures. |
0 |
0 |
0 |
0 |
0 |
— |
|
2011 |
Disguised remuneration generic & anti forestalling |
750 |
760 |
730 |
770 |
760 |
3,770 |
|
2011 |
Derecognition |
0 |
0 |
0 |
0 |
0 |
— |
|
2011 |
Functional currency (countering avoidance by investment companies) |
60 |
60 |
60 |
60 |
60 |
300 |
|
2011 |
Sale of lessor companies—preventing avoidance |
25 |
20 |
20 |
15 |
15 |
95 |
|
2011 |
SDLT anti-avoidance |
30 |
30 |
40 |
40 |
50 |
190 |
|
2011 |
Plant & Machinery leasing: anti-avoidance |
80 |
130 |
130 |
120 |
120 |
580 |
|
2011 |
Substantial donors to charities |
-10 |
-10 |
-10 |
-10 |
-10 |
50 |
|
2011 |
Total |
935 |
990 |
970 |
995 |
995 |
4,885 |
FA 2012
|
Finance Act |
Brief Description of Measure |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
Sub total |
|
2012 |
Life Insurance—earlier gains avoidance |
0 |
0 |
0 |
0 |
0 |
— |
|
2012 |
Changes to the Disregard Regulations |
0 |
0 |
0 |
0 |
0 |
— |
|
2012 |
SDLT Sub-sales avoidance |
neg |
neg |
neg |
neg |
neg |
— |
|
2012 |
EU Reasoned Opinion—Section 13 |
|
|
|
|
|
— |
|
2012 |
IHT Avoidance: Interests in Offshore Trusts |
neg |
0 |
0 |
0 |
0 |
— |
|
2012 |
Inheritance tax & spouse relief |
0 |
neg |
-5 |
-5 |
-5 |
—15 |
|
2012 |
IHT avoidance: settlor interested trusts |
0 |
15 |
10 |
10 |
10 |
45 |
|
2012 |
Tax avoidance: Manufactured Overseas Dividends |
30 |
40 |
40 |
40 |
40 |
190 |
|
2012 |
Plant and machinery leasing |
25 |
40 |
40 |
35 |
35 |
175 |
|
2012 |
Sale of lessor companies—protecting revenue |
0 |
0 |
0 |
0 |
0 |
— |
|
2012 |
Debt buybacks |
395 |
210 |
55 |
0 |
0 |
660 |
|
2012 |
Property Income Sideways Loss relief |
0 |
0 |
0 |
0 |
0 |
— |
|
2012 |
Higher rate for corp bodies purchasing residential |
neg |
65 |
65 |
65 |
75 |
270 |
|
2012 |
Retrospective SDLT anti-avoidance |
statement |
|
|
|
|
— |
|
2012 |
Review of high risk areas of the tax code: taxation |
Consultation |
|
|
|
|
— |
|
2012 |
Review of high risk areas of the tax code |
Consultation |
|
|
|
|
— |
|
2012 |
SDLT non-legislative anti-avoidance measures |
Operational response |
|
|
|
|
— |
|
2012 |
Anti-avoidance—corporate investors in Authorised |
0 |
0 |
0 |
0 |
0 |
— |
|
2012 |
SDLT avoidance sub-sale scheme consultation |
Consultation |
|
|
|
|
— |
|
2012 |
CGT Change to anti-avoidance rules |
0 |
neg |
neg |
neg |
-5 |
—5 |
|
2012 |
Total |
450 |
370 |
205 |
145 |
150 |
1,320 |
Yearly Totals
|
Finance Act |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
£ Million |
Total (£m) |
|
|
2005 |
Sub-total |
1345 |
1825 |
1890 |
|
|
|
|
|
|
|
|
|
5,060 |
|
2006 |
Sub-total |
|
375 |
455 |
370 |
|
|
|
|
|
|
|
|
1,200 |
|
2007 |
Sub-total |
|
|
1395 |
1575 |
1135 |
|
|
|
|
|
|
|
4,105 |
|
2008 |
Sub-total |
|
|
|
25 |
475 |
390 |
290 |
|
|
|
|
|
1,180 |
|
2009 |
Sub-total |
|
|
|
|
180 |
135 |
230 |
|
|
|
|
|
545 |
|
2010 |
Sub-total |
|
|
|
|
|
190 |
290 |
220 |
|
|
|
|
700 |
|
F(2)A 10 |
Sub-total |
|
|
|
|
|
0 |
0 |
0 |
0 |
0 |
|
|
— |
|
F(3)A 10 |
Sub-total |
|
|
|
|
|
0 |
0 |
0 |
0 |
0 |
|
|
— |
|
Cumulative Total 2005—2010 = |
12,790 |
|||||||||||||
|
2011 |
Sub-total |
|
|
|
|
|
|
935 |
990 |
970 |
995 |
995 |
|
4,885 |
|
2012 |
Sub-total |
|
|
|
|
|
|
|
450 |
370 |
205 |
145 |
150 |
1,320 |
Q371: Chair to Lin Homer: Personal Service Companies
As previously discussed, HMRC has strengthened its specialist compliance teams to more effectively address the use of personal service companies to disguise what would otherwise be an employment relationship. These teams focus on the enforcement of the intermediaries legislation, commonly referred to as IR35, ensuring that there is no tax lost in these types of arrangements. The legislation does not outlaw the use of personal service companies as they are often legitimate commercial arrangements.
Separately, the department undertakes work with end user/clients of labour to encourage them to undertake due diligence tests to ensure the validity of the supply chain. HMRC makes sure that big businesses are aware of the potential financial and reputational risks that may arise if they have not ensured their supply chain and it is found that they are engaging a company that is involved in avoidance.
As many of these arrangements involve legitimate commercial arrangements, it is beyond the remit of HMRC to be able to tell businesses that they should not enter into them, or encourage their use if appropriate. HMRC will offer advice on the tax consequences for businesses of the decisions they make.
Lin Homer
Permanent Secretary
17 December 2012