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Forthcoming laws for accountants and small companies are to cement tough practices for tax avoidance schemes as part of a government drive to stamp-out abusive tax operators. Under draft proposals published yesterday, the Inland Revenue (IR) will be alerted to tax avoidance schemes within a five-day period of their provision to clients. John Whiting, tax-partner at accountancy group, PriceWaterhouseCoopers said the five-day rule was ‘fierce’ and suggested a longer deadline should be allowed for tailored tax arrangements devised specifically for clients. The Government claims the legislation will stop rogue tax avoidance that loses the Treasury and the Exchequer vast amounts of funds in annual collection. The move to make all avoidance activities ‘Revenue-approved’ enforces the tax clampdown on business spurred earlier in the year by the Chancellor in his March unveilings. Published revisions to business tax include forcing companies to declare any scheme relating to remuneration or complex financial transactions, such as company-based derivatives. Any transaction involving sophisticated loans or unique financial instruments are also to be disclosed from clients, with the tightest controls saved for businesses running ‘in-house’ tax departments and advisers. Because of the avoidance rules, ministers and tax collectors said they hope to see greater transparency in transactions and financial exchanges taking place in business - even when intermediary services are consulted. Yet, accountants have expressed their concern over the draft’s intimidating content and the irregularity of the consultation period allocated for the regulations. Public consultation on the paper is to run until June 30, 2004 - cutting the government’s standard timeframe of 12 weeks. The Revenue collector has encouraged its critics by insisting on knowing the specifics of company tax and transactions but so far has refused to provide a list of schemes that advisers will not need to disclose. Over the necessity to declare ‘in-house’ operations and internal financial instruments, Loughlin Hickey, head of tax at accountants, KPMG, warned of potential system overload at the Inland Revenue. With sophisticated loans and internal tax instruments needing to be declared, he predicted the Revenue would eventually be “swamped” with potentially useless information. The IR is expected to take swift action to shut down well-known tax avoidance schemes often professionally run by former tax advisers and contractor groups claiming experience in side-stepping necessary taxation. Such schemes targeted by the government will be scrutinized for their legal operations and their contract obligations to clients and companies. The final draft of the regulations will be presented to Parliament after which, they will become law from August 1 2004. Companies are encouraged in the draft to electronically communicate with the Revenue on their internal tax procedures - with employers told to consider all areas of avoidance including income tax, corporation tax and capital gains tax. May 19, 2004 Email this article Printer friendly page Previous Page
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