Anti-avoidance

Financial products avoidance

Legislation will be introduced with immediate effect to block a number of specific financial product avoidance schemes, but the new style principles-based legislation on the taxation of disguised interest has been deferred for at least a year to allow further review and consultation. Some more specific measures were announced today and broadly concern themselves with schemes to turn interest income into a non-taxable form, and schemes that allow lessors of plant and machinery to sell books of rental income tax free. (Certain other measures targeted at tax advantaged leasing structures were also announced).

Controlled foreign companies

Again, a variety of detailed new rules, which will be effective from today, are intended to close down structures which allow overseas profits built up in low tax jurisdictions to fall outside of the current controlled foreign companies regime. This includes structures which ceded control to non-UK persons while leaving UK residents with almost all of the economic rights.

Capital allowance buying

Legislation will be included in Finance Bill 2008 to prevent profitable UK companies from obtaining a tax advantage from acquiring a trading company with the intention of selling that trade on to crystallise a balancing allowance for capital allowance purposes.

Income taxes

Legislation will also be introduced in Finance Bill 2008 to stop individuals avoiding income tax by making manufactured payments. The rules will apply where structures are put in place where the main purpose is to secure a tax advantage.

Double tax treaties

New rules are being introduced to prevent the abuse of double tax treaties in certain tax avoidance situations.

Tax avoidance disclosure regime

The current tax avoidance disclosure rules will be amended by Finance Bill 2008, with the aim of improving the existing system of identifying users of disclosed tax avoidance schemes.