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UK Announces Comprehensive Tax Compliance Plan

Wednesday, December 5, 2012

UK Chancellor George Osborne has announced a number of initiatives designed to crack down on tax avoidance amid mounting criticism of "aggressive" tax planning by multinational corporations.

The announcement comes ahead of the Chancellor's Autumn Statement this week and shortly after the Public Accounts Committee (PAC) issued a highly critical report on HM Revenue and Customs's (HMRC's) ability to deal with large corporations which generate significant income in the UK but which appear to pay little or no tax there.

In particular, companies such as Google, Amazon and Starbucks have come under fire from the PAC as a result of a number of hearings during which their tax affairs were revealed and slammed as "immoral." HMRC's response was criticized as lacking determination and appearing too lenient, and the department was urged to "get a grip" on the situation.

It appears that Osborne's latest initiative is designed to help HMRC do just that. The Treasury will award GBP77m (USD123.6m) in new funding to HMRC, so that it can expand its anti-avoidance and evasion activity. In particular, the money will be used to focus on the crackdown on offshore evasion and avoidance by wealthy individuals and by multinationals. According to the Treasury, this should result in an additional GBP2bn per year in tax that it says would have otherwise gone unpaid.

As part of the reform, additional staff and legal support will be given to HMRC to speed up its work in identifying and challenging multinationals’ transfer pricing arrangements, and to further strengthen HMRC's risk assessment capability across the large business sector. The aim is to ensure that multinationals do not shift profits out of the UK and therefore pay the tax due in accordance with UK tax law. A new "centre of excellence" will be set up within HMRC, and will look at how the department can best use data to identify offshore tax evasion, review its legal powers and work with other tax administrations to close the net on such evasion.

HMRC's Affluent Unit will also be expanded, with 100 extra investigators and additional risk and intelligence staff provided to target avoidance and evasion by the wealthy. There will be an increase in the number of specialist personal tax inspectors to tackle offshore evasion and avoidance of inheritance tax using offshore trusts, bank accounts and other entities, focusing in particular on the agents and tax intermediaries involved. HMRC's capacity to tackle aggressive avoidance schemes, including long-running cases involving partnership losses, will be enhanced, leading to settlement opportunities that offer a good deal to the Exchequer.

Also announced by Osborne is what he calls a ground-breaking agreement with the US. The agreement, the first of its kind, will significantly increase the amount of information on potentially taxable income automatically exchanged between both countries and further enhance HMRC’s ability to tackle offshore evasion. Steps will be taken to close the net on the marketers of aggressive tax avoidance schemes, including the introduction of new information disclosure rules and HMRC sanctions for the "cowboy" advisers who sell such schemes.

Osborne said of the package: "The government is clear that while most taxpayers are doing their bit to help us balance the books, it is unacceptable for a minority to avoid paying their fair share, sometimes by breaking the law. We are determined to tackle this problem and HMRC are making good progress, but we are giving them additional tools to bring in more. The action we are announcing today will help HMRC close in not only on those who seek to avoid or evade tax, but on the dubious ‘cowboy’ advisers who sell them the schemes and dodges they use to cheat the law-abiding majority."

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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