Anti Avoidance Measures

Changes to the Window for Enquiry

Changes are proposed to the enquiry window for self assessment returns for 2007/8 onwards and company returns for accounting periods ending after 31 March 2008. The enquiry window will be linked to the date returns are actually received, when submitted in time. Other than for large groups of companies it is proposed that the enquiry window should close one year after delivery of the return.

Changes to the Self Assessment Tax Return Filing Dates

Changes are proposed for two separate filing dates for income tax self assessment returns issued after 6 April 2008; 31 October for paper returns and 31 January for returns filed online. This confirms the revised proposals made by Lord Carter in his review of on-line filing last year.

Extension of VAT measures against Carousel Fraud

Existing anti-fraud measures will be extended from 1 May 2007 to include businesses trading in certain electronic goods. The existing legislation allows HMRC to invoke the doctrine of “joint and several liability” with a third party in cases where VAT remains unpaid elsewhere in the supply chain.

The affected goods will now include electronic equipment “of a kind ordinarily owned by individuals and used by them for the purposes of leisure, amusement, or entertainment.” Businesses trading in these goods will need to implement procedures to avoid significant exposure.

In addition, the Finance Bill will widen the scope in which HMRC will be able to use its powers in relation to all traders in specified goods.

This announcement comes hot on the heels of confirmation earlier this week that reverse charge accounting will apply to the supply of mobile telephones and computer chips to businesses in the UK.

Payment of VAT on non-business use of Land and Buildings

New measures are to be introduced which have effect from 21 March 2007 to calculate the VAT due where land and property is used both for business and non-business purposes. VAT can initially be recovered in full, but a charge is made in subsequent years to account for the non-business use.

The proposals will mean that the period over which the VAT is paid is shortened, typically from 20 to 10 years. These measures will apply to property already owned, as well as future purchases. The sectors primarily affected will be education, health, and charities, although in principle any business sector might be affected.

In summary:

  • Provision of consistent powers and safeguards for all HMRC’s criminal investigations.
  • A single penalty regime for incorrect returns for income tax, corporation tax, PAYE, NIC and VAT.
  • Measures to encourage earlier filing of personal and corporate tax returns.
  • Existing anti-fraud measures to be extended to businesses trading in certain electronic goods.
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