Chancellor targets lawyers over tax avoidance
Emma Loveday commented on the Autumn Statement in an article in The Times Brief on 24 November 2016.
Abolishing the autumn statement was the most legally notable element of what was the chancellor's first and last autumn statement, lawyers claimed yesterday.
Legal experts also forecast that moves by Philip Hammond (pictured) to simplify the tax system by providing his successors with fewer opportunities "to fiddle" were destined to fail.
"Future chancellors will not be able to resist making tweaks and changes to make themselves look in control," Stuart Thomson, of the Westminster law firm Bircham Dyson Bell, said. "There are very big set piece political occasions for chancellors to show what they are made of. Future chancellors will feel less constrained than Mr Hammond."
Advice on tax avoidance was the headline issue for lawyers – and Hammond offered them little comfort. "The chancellor continued in the same vein as his predecessors in targeting tax evasion, tax avoidance and aggressive tax planning," said Emma Loveday, a partner at fellow Westminster law firm Wedlake Bell.
Hammond confirmed that the government will introduce a penalty for those that enable a tax avoidance scheme which is later challenged by HMRC and defeated in the courts.
"Tax advisers will be concerned at the apparent equation of tax planning with tax evasion," she said, "and will want there to be a clear line within the proposed legislation so that advisers can be sure that standard and legitimate planning is not affected, and neither are individuals deterred from fairly organising their tax affairs to preserve wealth for their families."
Solicitor leaders also leapt to warn the government off going too far. "While we completely support measures to make our tax system just and effective," Catherine Dixon, chief executive of the Law Society of England and Wales, said, "we continue to urge the government to ensure they do not punish advisers providing genuine tax advice or prevent taxpayers from getting advice on how to understand and comply with their tax obligations."
Haydn Rogan, a tax partner at the national law firm Weightmans, described the chancellor's efforts to raise tax income by restricting salary sacrifice schemes as "more of a cosmetic exercise than a real, substantive revenue-raising measure".
The schemes involve employees giving up part of their salary in exchange for certain tax-free benefits and perks. Rogan said: "Given that it has already been announced that the changes will not affect salary sacrifice arrangements involving pension contributions, childcare and cycle to work schemes – three of the most common types of salary sacrifice scheme – it is hard to view any such changes as anything other than tinkering at the edges and the additional tax raised in the overall scheme of things will be a mere drop in the ocean compared to the increased borrowing requirements."
Good news; bad news
City lawyers agreed that there were no surprises in the statement. Dominic Stuttaford, a tax partner at the transatlantic law firm Norton Rose Fulbright, welcomed Hammond's confirmation that the government will reduce corporation tax to 17 per cent.
However, he said, "the less good news for many will be the confirmation that the restrictions on relief for interest and the changes to the loss rules are going ahead; these have been the subject of much comment over the last few months and it will be interesting to see the extent to which HMRC has taken account of the representation made. Many had asked for the changes to be delayed."
Stuttaford went on to describe as outright "bad news" for the insurance sector the chancellor's announcement that there will be another increase in the rate of premium tax, meaning that the level will have doubled in the past two years.
A ban on letting agents charging tenants fees in England and Wales after Scotland banned them in 2012 will be "met with despair by many agents and their landlord clients", predicted Ian Peach, head of residential property at Coffin Mew solicitors.
"Many agents operate both a sale and rental business and the past year or so has seen significant downward pressure on sale commission fees," he said. "Therefore, additional pressure on their fees for rental aspects of their business will prove a real challenge for a lot of them unless they pass responsibility for fees to the landlord. They certainly won't be able to absorb the costs into their own."
Moves to crackdown on pension fraud by banning cold-calling are "unlikely" to deter criminals, claimed Dominique Dolman of the law firm Irwin Mitchell. "People will continue to receive unsolicited calls and will be contacted via other means such as text messages, emails and advertisements including website advertisements as scammers seek new ways to exploit the rules," she predicted.
However, the lawyer said that the proposals could give the public confidence "to put the phone down if contacted in the future by aggressive sales representatives in the knowledge that such calls are now banned".
The chancellor also confirmed a story broken in The Times more than two months ago -- that ministers are to scrap plans to privatise the Land Registry. Hammond told MPs that "modernisation will maximise the value" of the registry, but it would stay in public hands.