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More Debate in House of Commons Over Tax Avoidance and Evasion

IR35 of Course Gets a Mention

A further debate took place in the House of Commons on 14th November.  This time the debate was regarding the leaked Paradise Papers which uncovered tax avoidance on a rather grand scale. It named some of the UK’s most high-profile individuals as having used tax avoidance schemes to stash their cash offshore, with the sole purpose of paying very little tax.

The Government’s campaign against tax avoidance has therefore ramped up a gear, and the story, having attracted so much media attention because of the involvement of such high-profile names, puts even greater pressure on Philip Hammond to take some action to address the debacle on Wednesday.

It’s unsurprising that during a debate over tax avoidance IR35 would get a mention, but this time someone spoke some sense. The uncovering of the Paradise Papers has demonstrated that there are far bigger problems in terms of tax avoidance than IR35.  Vincent Cable, Leader of the Liberal Democrats stated;

“At present, a big crackdown is taking place on what are called IR35 companies. These are contractors for the health service, and they are often software specialists. There is undoubtedly a certain amount of tax avoidance in relation to national insurance, but these companies are being pursued in a highly aggressive way that the Government do not use in pursuing much bigger fish…It is the pettiness of such measures, contrasted with what happens on large-scale avoidance, that attracts so much ire and anger from the public.”

What the Paradise Papers have shown is that the Government have far bigger fish to fry and have highlighted the necessity to demonstrate to the nation that action will be taken to put an end to it.

HMRC aggressively target Personal Service Companies and spend a considerable amount of resources to recover what may be thousands of pounds worth of tax from people who are much less able to defend themselves, when they could be focusing on the big corporate companies to reclaim millions of pounds worth of tax in one fell swoop.

In 2013, global firms such as Starbucks, Google and Amazon, were reported in the press as having complex tax arrangements in place in order to pay less tax.  At the time, MPs urged the government to name and shame those who didn’t pay their ‘fair share’ of tax but the then Prime Minister, David Cameron, and Chief Secretary to the Treasury, Danny Alexander, failed to take such action, saying that it would breach taxpayer confidentiality.

Perhaps in the wake of the Paradise Papers, Wednesday’s Budget will pay more attention to resolving tax avoidance on a larger scale, but of course we shouldn’t count our pennies before they’re taxed…HMRC may be much more wary of dealing with the big fish, who will undoubtedly have much more legal armour up their sleeves.

By Qdos Contractor

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5 thoughts on “More Debate in House of Commons Over Tax Avoidance and Evasion”

  1. The Snail

    The main trouble is that the Government Taxes profits – made in the jurisdiction of the UK. Any company can move profits about by sensible accounting. For example a company can transfer materials at cost to a subsidiary and then make a large profit in the jurisdiction of the subsidiary.

    Profits can thus be moved about from a high tax jurisdiction to a low tax one.

    The only way to force a company to pay tax in a jurisdiction is to connect the tax to turnover in a jurisdiction. A turnover tax as opposed to a profits tax.

    • The Snail

      Come to think of it – that is how income tax works – a turnover tax. I can’t plead my mortgage is so big that I only have a small residual income(profit) – so I should pay less tax!

    • The Q

      > The main trouble is that the Government Taxes profits –
      > made in the jurisdiction of the UK. Any company can
      > move profits about by sensible accounting. For example
      > a company can transfer materials at cost to a subsidiary
      > and then make a large profit in the jurisdiction of the
      > subsidiary.

      The move towards sales/transaction taxes seems to be
      getting ever stronger.

  2. Ken Lorp

    I’m not sure what the fuss is about – there is nothing illegal in tax avoidance. If the government makes complex rules, they should not be surprised if companies take advantage of them.

  3. Ying tong

    We won’t have long to wait to find out but the risk is that the Chancellor may choose to muddy the waters. In the face of Panama and Paradise he could announce today that additional measures are being introduced to combat tax avoidance. Cue further IR35 compliance on the minnows while the big sharks continue to run rings around the government.

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