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This year's Budget was full of measures to clamp down on tax avoidance. The most striking was the proposal that anyone using a tax avoidance scheme will have to tell the Revenue that they are doing so. In the past, you could just put the bare numbers in the tax return, and you would only have to tell the Revenue about your cunning plans if they bothered to ask a question. The Revenue obviously want clearer and earlier notice of the 'multitude of sins' that the numbers can hide.
It's easy to see why the Revenue want such a rule, but it's much harder to see how it will work in practice. Any half-decent tax planning idea involves obeying the rules that are favourable, rather than breaking any rules. So it can be hard to tell what's acceptable - just following the rules, which must be there to encourage you to do what's suggested - and what isn't.
Hard to operate or not, the rules will be in the Finance Act, and the Revenue have published detailed regulations. To start with, they are concentrating on 'remuneration schemes' - which reduce the tax payable on salaries and benefits - and on 'certain financial instruments' - where there have been some ingenious schemes to create tax-allowable losses matched by tax-exempt gains. So it isn't absolutely any tax planning idea.
We will have to keep a close watch on how these rules develop, and we will keep you informed about their likely practical effect. The first responsibility for reporting schemes falls on people who 'promote' them - who have the idea and sell it to others. So we'll have to think about sending a copy of this newsletter to the Revenue in future...
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