Anger over avoidance clampdown

THE Government‘s obssession with tax avoidance means it will introduce retrospective legislation to hunt down anyone who uses schemes to minimise their income tax or national insurance contributions.

This means that taxpayers could be forced to pay up for any tax the Inland Revenue says would have been due had the laws been in place, potentially leaving people facing extremely large tax bills.

Loughlan Hickey, head of tax at the accountants KPMG, described the proposals as unacceptable and unprecedented.

He declared: 'It‘s one thing closing avoidance schemes down but use of retrospective legislation here is a huge precedent which will need to be revisited.

'I have no doubt that it will be challenged. It sends completely the wrong signal out, which is that if the taxman doesn't have the machinery in place to stop something it will find a way. People won‘t know where they sit in this complex world.'

Gordon Brown‘s determination to make people pay tax that is due, even when they have used legitimate avoidance schemes to minimise their exposure, could also threaten the viability of many of the partnership and smaller company set-ups used by entrepreneurs to get started.

The recent Arctic Systems case saw the taxman tackle a husband-and-wife company who used their business to pass the main breadwinner‘s earnings over to his spouse as a dividend to minimise their tax bill.

Mr Hickey said that what the couple had done was not illegal but the Revenue had decided otherwise: 'People who have set up husband-and-wife companies considered they were following the normal principles of taxation. What we see here is a concerted attack on anyone trying to avoid tax and national insurance contributions on their employment income.'