Anti-avoidance

The Budget contained several measures aimed at combating tax avoidance. Some were as a result of earlier consultation, others were new.

In the first category, venture capital trusts will be prevented from returning share capital to investors within three years of the end of the accounting period in which the trust issued the shares.

This measure came about as a result of HMRC concerns that particular forms of share buy-back and reinvestment arrangements offered by venture capital trusts contravened the intention of the legislation. It will apply to shares issued from 6 April 2014.

Also the subject of previous consultation, the government has amended a measure concerning the artificial use of dual contracts by non-domiciles. It prevents contrived arrangements by high-earning UK-resident, non-domiciled individuals who obtain a tax advantage by creating artificial divisions between the duties of a UK employment and an employment overseas.

After a technical consultation, the legislation will be amended to prevent charges arising on nominal directorships if they or their associates own or control less than 5% of the company’s ordinary share capital.

The legislation will also be amended to clarify that an income tax charge cannot arise on income related to employment duties performed in tax years before 2014/15. It will also take into account employments held for legal or regulatory reasons. Finally, the threshold in the comparative tax rate test will be reduced from 75% to 65%.

The government confirmed that the accelerated payments proposals are to go ahead. Legislation will be introduced in Finance Bill 2014 to …