TREASURY’S crackdown on tax planning schemes appears to be paying off, with the number of new plans falling to the lowest level since records began nearly a decade ago.
Fewer tax planning schemes were reported to HMRC in the year to September 2013 than in any other year since 2004, when the tax authority made disclosure mandatory, according to research released by law firm Pinsent Masons today.
Over a third of the available products disappeared between 2012 and 2013, with 121 schemes reduced to only 77. As recently as 2004-5, there were 587 schemes on offer.
“(HMRC) have been successful in dissuading the bigger accountancy firms from creating new tax avoidance schemes with many major professional services firms now avoiding the more extreme forms of tax planning as it carries with it a reputational risk,” said Pinsent Masons’ head of tax, Jason Collins.
The firm’s researchers added that HMRC could do more to persuade individuals who had long since entered an avoidance scheme to exit it, allowing the government to recover a larger share of revenue.
The researchers suggest that the government should consider an amnesty to clear the backlog of existing schemes, giving people an incentive to give up on planning schemes they may have entered years earlier..
Collins concluded: “HMRC is getting better at using the stick, but it could recover more of what it considers to be the UK’s missing taxes by making more use of the carrot.”