Tax lawyers and accountants last week welcomed a relaxation of the proposals on disclosing potentially abusive tax schemes to the UK Inland Revenue. On June 22 2004 Dawn Primarolo, the paymaster general, announced changes to the draft regulations setting out how the tax avoidance disclosure requirements would operate in practice.
When the government first released the draft regulations on May 17 2004 they were met with condemnation from advisers, who claimed that rather than resolving the uncertainty surrounding the 2004 Budget's proposals on tackling tax avoidance, the regulations would create further confusion because they did not make clear which transactions would be reportable.
In response to negative feedback from both tax advisers and businesses, the Inland Revenue announced the following amendments:
• a list of financial products to which disclosure does not apply, including Individual Savings Accounts and finance leasing;
• changes to the commencement rules for financial products which will mean that advisers will not have to revisit advice provided since March 18 2004 to determine whether transactions should be reported; and
• additional time for promoters to make disclosures in respect of employment-based products.
The Inland Revenue pledged to continue the discussions with the tax community on the regulations, guidance and explanatory notes, which will be finalised once the consultation process ends on June 30 2004.
"This seems to be something of a climb-down," said Philip Gershuny, a tax partner at the law firm Lovells in London. "They've clearly listened to the sensible representations that have been made. Lawyers will be jumping up and down but I think they listened to industry concerns really."
David Cruickshank, head of tax at Deloitte in London, also welcomed the changes. "All the amendments of which we are aware we consider to be a step in the right direction," said Cruickshank. "However, we would like the government to go further as we still believe that a five-day disclosure period is not long enough when providing bespoke advice on commercial corporate transactions."
Cruickshank was optimistic that the regulations would eventually be workable provided the Inland Revenue continued to listen to industry concerns: "We anticipate that although this is an additional regulatory requirement we should be able to satisfactorily meet the disclosure requirements without a major impact on our business."
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