Gauke was responding to a question from a Labour member of Parliament about disclosure since the 50% rate of personal income tax was introduced on April 22 2009.
The question came from Owen Smith, Labour member of Parliament for Pontypridd in Wales.
“To ask the Chancellor of the Exchequer how many tax-planning schemes were disclosed to HM Revenue and Customs in the year preceding the announcement of the 50 per cent rate of income tax on 22 April 2009; and how many have been disclosed since that announcement.”
The rules, which were introduced in the Finance Act 2004, are aimed at obtaining for the tax authorities early information about tax arrangements and how they work, and information about who has used them. Details of a tax scheme that is intended “to provide the user with a tax and/or National Insurance contribution advantage when compared to adopting a different course of action” are required to be disclosed.
Promoters of relevant tax arrangements are required to disclose them to HM Revenue and Customs (HMRC). A promoter is defined in the guidance to the rules which was updated in April 2011, as a provider of taxation services, or a bank or securities house who is responsible in any way for the design of a scheme, who makes the scheme available for implementation, or organises or manages its implementation. Tax planning caught by the rules comprises income tax, corporation tax, capital gains tax, National Insurance contributions, stamp duty land tax and inheritance tax.
The Treasury has used disclosure to introduce secondary legislation banning different forms of avoidance.
“The disclosure regime was introduced to obtain early information about tax avoidance schemes and the users of such schemes to inform policy development, compliance activity and to deter avoidance,” said a spokesman for HMRC. “To date the regime has performed well against those objectives.”
HMRC statistics show that under the headings of main regime, stamp duty land tax and inheritance tax, 121 disclosures were made in the year to the end of September 2011. This was down from 141 in the previous 12 months and 151 in the year before that.
“HMRC seems to think that a fall in the number of disclosures is because the rules aren’t working,” said Vimal Tilakapala, a partner of Allen & Overy in London. “There’s a degree of paranoia that they are missing out on something. But it’s a function of them working. They have been pretty successful in what they sought to do.”
The tax authorities clearly believe the Disclosure of Tax Avoidance Schemes, or DOTAS, as the initiative is known, is worth pursuing and continue to develop it.
“The regime is kept under continual review to ensure it keeps pace with the evolving avoidance environment,” the HMRC spokesman said. “ For example, a number of measures came into force in January 2011 to strengthen and improve the regime, and from Aril 2011 the regime was extended to Inheritance Tax on transfers of property into trust. Budget 2011 also announced proposals to strengthen and improve the descriptions of schemes to be disclosed (Hallmarks) to target known avoidance risks.”
