UK Budget 2013 - No safe havens

From a Channel Islands perspective, the predominant theme of the 2013 UK Budget is tackling tax evasion and avoidance.  Alongside the publication of the Budget, was the release of a progress report on tackling avoidance entitled "No safe havens" by HMRC's new centre of excellence on offshore tax evasion.

This is hardly surprising given recent focus on tax avoidance by the Media and the UK Government.  Having stirred up public sentiment against those that are "not paying their fair share", we are now seeing measures such as naming and shaming of both users and promoters of tax avoidance schemes.  The distinction between legal tax avoidance and illegal tax evasion can no longer be seen as the divide between what is acceptable behaviour and what crosses the line - the line has moved.

The UK is leading the charge on international automatic information exchange, and the announcement today in the Budget that agreement on an IGA has been reached with all three Crown Dependencies is an important step for the UK towards this cause.  Cayman has also announced today that it will enter into a UK IGA.  The spotlight on tax evasion has not been limited to the UK but can be seen in other higher tax jurisdictions, and the idea that automatic information exchange will quickly become the international standard looks very credible.

Alongside the UK IGA is a disclosure facility.  The UK expect to raise a startling £1 billion from the Jersey, Guernsey and Isle Of Man disclosure facilities over the next 5 years.  Given the Lichtenstein disclosure facility (with more generous terms) raised only £140 million in its first 2 years, and in light of the fact that the three Crown Dependencies are highly regulated, this target looks highly ambitious.  Perhaps in time the failure of the Jersey, Guernsey and Isle Of Man facilities to raise significant amounts will finally dislodge the perception of the Islands as tax havens.

So what else is in the Budget that will impact us?
  • Some changes affecting UK and offshore funds including measures to enhance the attractiveness of UK funds and closing loopholes in the offshore fund regime.
  • The Government will consult on measures to deal with offshore employment intermediaries being used to avoid UK NIC and income tax.
Also, some previously announced measures come into force:
  • The Statutory Residence Test is effective from 6 April 2013.
  • The UK General Anti Abuse Rule comes into force from 6 April 2013.
  • Taxes (capital gains tax and SDLT) on high value residential property owned by non-natural persons.

If you would like any further information or clarification on any of the measures announced, please do not hesitate to contact  a member of our Budget working party whose details appear alongside.