Taxman's £1.6bn tax shelter hunt

EVER been persuaded to sign up to some new tax avoidance scheme by your accountant? Be afraid. Be very afraid.

The Inland Revenue has set up a special investigation unit to look into all such schemes and it won't be limiting the scope of its enquiries just to the schemes themselves. Any aspect of your financial affairs could be put under the microscope.

Details of the crackdown have yet to be disclosed but the Inland Revenue's spring report, published today, reveals that the taxman is on course to collect £1.6bn extra revenue over the next three years.

The figure was set down by the Chancellor Gordon Brown in the Budget. Brown, furious at the number of tax avoidance schemes being set up by accountants to exploit loopholes in the legislation, has vowed to get tough with anyone who uses one.

This, according to Richard Clarke, director of tax investigations at the accountants PWC, means a vast potential increase in the number of people investigated.

Accountants have long complained that the taxman is unable to differentiate between legitimate tax avoidance, that is using loopholes in the law to pay less tax, and tax evasion, which is illegal and little more than not declaring income to the authorities.

But now, Clarke says, anyone who's taken advantage of a tax planning scheme can expect to find their affairs looked into.

'The increase in revenue that the taxman says it will bring in is a very large increase. What we‘re seeing is an attack by the Inland Revenue on all fronts. There is legislation in this year's Budget to clamp down on tax planning and the taxman has been given all the resources it needs to go out and investigate more companies and individuals than before.‘

The new Inland Revenue team set up to investigate tax shelters and other planning wheezes is the Avoidance Intelligence Unit and it will be staffed by senior tax investigators.

'It's going to have a pretty free rein to carry out investigations and it will track any sort of planning scheme put in place by accountants for their clients,‘ Clark added.

Earlier this week some 21 large companies were named in an Early Day Motion tabled by Labour MP Austin Mitchell as companies whose tax affairs ought to be investigated.

Mitchell said the Government should find out why these businesses pay less than the standard rate of corporation tax and what tax avoidance schemes they used to do this.

The companies named in the motion include four financial services giants – the Prudential, Barclays, Alliance & Leicester and Lloyds TSB. Others were Allied Domecq, Amersham, BOC, Compass, Dixons, GSK, Hanson, Kelda, Northern and Shell, Portland Enterprises, News Corporation, Rolls Royce, Sage, Severn Trent, Shell, Virgin and WPP.