As it is quite widely known, the budget introduced some quite widespread reforms to the “tax planning” profession and public alike. Any tax professional will quickly tell you the difference between “avoidance” and “evasion”, however, there is now a system that will regulate the tax planning industry, and requires disclosure of tax avoidance schemes. Which almost brings avoidance and evasion closer together in the Revenue’s eyes.

The new tax avoidance disclosure legislation will apply to not only those boutiques in the UK that consistently market such schemes, but also those that devise such schemes in house, or purchase such schemes from offshore providers. There will be a requirement for promoters to register tax planning schemes with the Inland Revenue, and for those using such schemes, to quote the reference numbers for the schemes used, when they self assess. There will also be obligations to notify the Inland Revenue of the nature of schemes devised in-house, or purchased from offshore providers. There are also similar rules for VAT, which once more requires disclosure of any avoidance schemes used or promoted.

The UK, in its moves to a self assessment orientated environment since 1996 for individuals and 1998 for corporates, places the onus on taxpayers to self regulate their affairs. Long gone are the days when the Inland Revenue were seen to be actively policing the tax regime, for the onus is on the taxpayer to police themselves.

The question as to what extent these reforms will have, can only be judged over time. Particularly, one question that needs to be addressed, is the extent to which these rules could apply to perhaps the most insignificant transactions. In addition, to what extent will the “main benefit” let-out apply. For instance, the whole transaction may well be commercially orientated, but if there is otherwise than incidental tax benefit, will this in itself require disclosure.

It will also be interesting to assess the impact on the reactive nature of recent tax legislation. Over the last few years, we have seen significant legislation introduced over the course of a tax year, all of which is designed to put an immediate stop to certain tax avoidance schemes – notable are the recent reforms covering Gilt Strips, Film Partnerships, Holdover relief, Principal Private Residence exemptions, and so the list goes on.

From the tax profession’s point of view, as the lack of clear guidance at this moment in time, it is difficult to be positive to how this new regime will work in practice. If these proposals do not work in the manner the Government anticipates, can we also expect to see proposals for a revised GAAR. This was on the agenda several years ago as we all remember. Personally, I believe that this regime will be short lived, and General Anti Avoidance measures will be introduced in due course.

Only time will tell, and as normal with the tax profession and the nature of its reactive legislation, it is once more a question of watch this space!