Tighter tax rules may hit large firms, experts say, as Chancellors may look to recoup £6.2bn lost each year due to a loophole
- Rishi Sunak has asked HMRC to launch a consultation on uncertain tax planning
- This practice loses the Treasury £6.2billion each year
- That is equal to 18% of total uncollected taxes
Sunak has asked the Revenue to launch a consultation on ‘uncertain tax planning’
Plans to close a £6.2billion-a-year tax loophole could hit businesses struggling to survive the coronavirus crisis, experts have warned.
Chancellor Rishi Sunak is considering making it compulsory for big businesses to alert the taxman when they have used their own interpretations of the rules to pay less corporation tax, VAT, excise duty or other taxes.
This type of action is known as ‘uncertain tax planning’ and firms that fail to alert Revenue & Customs could in future face criminal penalties.
Sunak has asked the Revenue to launch a consultation on the practice after learning that it loses the Treasury £6.2billion each year – equal to 18 per cent of total uncollected taxes.
The measures would affect firms with annual turnover of more than £200million or more than £2billion on their balance sheets.
Chris Sanger, head of tax policy at the accountancy group EY, said: ‘Taxpayers will have to understand the thinking of the tax inspector, and do a bit of mind-reading. That’s a new burden.’
Mike Warburton, former tax director at the accountancy group Grant Thornton, said: ‘If the law is uncertain, then they should change it to make it clear. It’s a basic human right for people and companies to know how they will be treated by the Government and its agencies.’
The Revenue said some firms already approached it ‘for clearance and agreement’ but said that currently the process ‘is voluntary’.
It said: ‘It should be noted this measure is not intended to promote any assumption that the Revenue’s interpretation is always correct.’