The Annual Tax on Enveloped Dwelling, introduced in April 2013, is an annual charge payable by companies that own luxury properties. As a result various tax schemes have come into being to help companies avoid paying the tax but under new regulations they must be disclosed to HMRC.
The tax ranges from between £15,000 for a property valued between £2 million and £5 million and goes up to £140,000 for properties valued at over £20 million.
The Disclosure of Tax Avoidance Schemes (DOTAS) ensures details of schemes designed to provide users with an unfair tax advantage must be provided to HMRC, who then use the information to inform their compliance work. This also helps the government to consider any amendments to legislation that may be necessary.
Penalties for non-disclosure of a scheme are up to £1 million and penalties for users failing to report the use of a scheme on a return are £100 for the first failure, £500 for the second failure and £1000 for subsequent failures. This applies to each scheme to which the failure relates.
Introducing changes to DOTAS, the regulations build on the work from the 2012 ‘Lifting the Lid’ consultation which looked at tackling the supply of and demand for avoidance schemes.
As part of the consultation, the government proposed revising and extending DOTAS as necessary and improving the information available to HMRC.
The changes add the annual tax on enveloped dwellings to the regime where currently schemes designed to reduce a user’s tax bill for income tax, corporation tax, capital gains tax, inheritance tax, national insurance contributions, stamp duty land tax and VAT must be disclosed.
In another move to further tackle tax avoidance, promoters of avoidance schemes will now be forced to provide HMRC with details of their client’s national insurance number and unique taxpayer reference. This will make it much easier for HMRC to track down avoiders and put them under investigation.
This will also make it harder to avoid tax by using so called disguised remuneration schemes which are schemes designed to avoid tax and national insurance on employment income.
‘This government has been clear that aggressive tax avoidance is unacceptable and will not be tolerated,’ said Exchequer Secretary David Gauke.
‘The regulations we are laying mark a significant strengthening of the rules and builds on the considerable work we have done to tackle not only tax avoidance schemes but also the promoters of these schemes,’ he explained.
‘HMRC has been well resourced to tackle tax avoidance and has made it clear that they will pursue those who attempt to avoid their responsibilities,’ he added.
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