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Our perspective on recent casesProcedureGuide Dogs for the Blind Association v HMRC [2012] UKFTT 687John Scofield v HMRC 2012 UKFTT 673

SubstanceEuropean Commission v Republic of Finland (C 342/10) Murray Group Holdings and Others v HMRC [2012] UKFTT 692MJP Media Services Limited v HMRC [2012] EWCA Civ 1558Cloud Electronics Holdings Limited v HMRC [2012] UKFTT 699Iliffe News and Media Limited v HMRC [2012] UKFTT 696

Recent ArticlesTax Disputes: HMRCs code of governance

by Jason Collins and Ian Hyde

Events 20

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News and Views from the Pinsent Masons Tax team

Combining the experience, resources and international reachof McGrigors and Pinsent Masons

PM-TaxIssue 14 Thursday 6 December 2012

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Our CommentThe outlook remains bleak: Senior members of our tax team

consider the Autumn Statement

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Pinsent Masons

It is my pleasure to introduce this Autumn Statement Special Edition of PM-Tax. In addition to the restrictions on higher-rate pension relief and a grab from middle-earners in the form of a below-inflation increase in the higher rate threshold the focus of the Treasury is set clearly on raising revenue from enforcement and compliance. There are a raft of highly practical measures tackling both tax avoidance and tax evasion all underpinned by significant additional investment. HMRC is alone amongst almost all Government departments in being immune from cuts to its operations. In the wake of Mondays announcement, the

Chancellor already confirmed that HMRC would be allocated an additional 77million to target avoidance, evasion and fraud, with the estimated tally being a staggering 22 billion a year by the end of this Parliament a 70% increase in the annual tally over a five year period.

As expected, a range of measures tackle tax evasion and avoidance as well as several specific schemes recently identified by HMRC. But there are two fascinating suggestions buried in the small print.

The first is the commitment to use HMRCs resources to

accelerate its resolution of avoidance schemes, including long-standing avoidance schemes involving partnership losses. This could mean that some long running tax enquiries are closed at last according to some form of settlement strategy.

The second is the intention of this Government to consult with the Cabinet Office on the use of the procurement process to deter tax avoidance and evasion. Arrangements could come into effect from April 2013 which would mean that the tax compliance records of private sector bidders would become a relevant factor in the award

of government contracts. We suspect that this would be along the lines of provisions previously applied in relation to Diversity, the Bribery Act and corporate social responsibility. Companies intending to bid for government contracts including major infrastructure projects should examine their tax policies and compliance records very carefully.

This edition of PM-Tax includes comments by senior members of our Tax department on the key measures announced by the Chancellor yesterday. We hope that you find it informative and insightful and, as always, we would be very pleased to hear from you..

PM-Tax | Issue 14 Thursday 6 December 2012

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Our Comment

James Bullock is Head of the Litigation and Compliance Group.

He is one of the UKs leading tax practitioners and has been recognised as such in the leading legal directories for many years. James has over nineteen years of experience advising in relation to large and complex disputes with HMRC for large corporates and high net worth individuals, including in particular leading negotiations and handling tax litigation at all levels from the Tax Tribunal to the Supreme Court and European Court of Justice.

Email: james.bullock@pinsentmasons.comTel: +44 (0)207 054 2726

Introduction By James Bullock

Pinsent Masons

The necessity to strike a balance in fiscal policy is both economic and political , and the Chancellor looks to have achieved it . Increases in most working-age benefits, child benefit (for those who still qualify to receive it) and the threshold for the basic rate of income tax are popular with lower earners and Liberal Democrats, while the absence of a net rise in taxes, a corporation tax reduction, a significantly improved annual investment allowance for businesses, and a range of tax anti-avoidance measures pleased higher earners and Conservatives. The cancellation, rather than postponement, of Januarys 3p increase in fuel duty brought cheers to an otherwise sombre occasion. The Chancellor also had one eye on international markets and stressed the importance of preserving the UKs reputation and therefore the value of gilts, by delivering a reduction in the

deficit. He acknowledged the risk of the UK being overtaken by emerging economies, with his comments on the importance of maintaining the UK as an attractive investment environment and in his announcement to centralise funding for Local Economic Partnerships in order to increase the impact of that funding. However, the extension of the austerity programme for deficit reduction to 2018 and the revision of the debt to GDP target to be met in 2016 now both fall after the next General Election, which in political terms may be too late. The bright spots in the statement were mainly related to infrastructure with a long-awaited 5bn of capital investment funded by savings in other areas. The hope is that these projects for roads, ultra-fast broadband, scientific research, schools and colleges will generate short-term activity in the

construction sector which remains a drag on economic growth. However, there is scepticism around the impact of the Government acting as an equity co-investor in PFI projects. Again, in political terms , these projects will need to be seen to be delivered in the run up to May 2015 for electoral purposes. The infrastructure investment and other measures also trigger additional funding for the devolved administrations under the Barnett formula, which those Ministers will now seek to use as stimulus. The Office for Budget Responsibility took its share of blame in its own reporting for what the Chancellor described as over-optimism in economic forecasting which did not take into account the extent of the Eurozone crisis and its impact on trade and on funding costs. Looking ahead, the OBR predicts growth above 2% from 2014 based on private consumption, business

investment, and net trade although prospects for all three look weak for 2013. The previews that this statement would pit strivers against skivers in terms of those aspiring to generate economic activity and wealth versus those prepared to rely on welfare support indefinitely, did not materialise but the Chancellor concluded with a commitment to helping those who want to work hard and get on which he hopes will resonate with individuals, businesses and investors. However, as with the Budget in March, the devil may be in the detail. The Chancellors and indeed the Governments reputation for economic competence may not survive another unravelling of a rousing Parliamentary speech into a series of u-turns and revisions..

PM-Tax | Issue 14 Thursday 6 December 2012

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Our Comment

Alastair Ross is a Director who has more than 12 years award-winning experience in public affairs and government relations spanning private practice, in-house and the public sector. His expertise covers corporate affairs, social inclusion, economic policy, and corporate social responsibility. He advises clients on the prospects of UK constitutional reform, the strategic and commercial implications of Parliamentary Bills, regulation, legislative consultations, and policy proposals emerging from Parliament and Government at UK, Scottish and local authority levels.

Email: alastair.ross@pinsentmasons.comTel: +(0)131 777 7144

A balanced Autumn Statement?By Alastair Ross

Pinsent Masons

The Chancellors determination to extract tax revenues from those with the deepest pockets shows no sign of diminishing but there were some indications that he is increasingly concerned that simply soaking the rich will in the long term be counter productive to the revival of the wider economy. The somewhat startling statistic that 5% of the population pay around 50% of all of the income tax collected does undermine the widely held concern that the wealthy are able to avoid tax with impunity. And fairness is now being extended to the better off with next years increase in personal allowances applying to those in the higher rate bracket.

Before the Autumn statement there was some worry that the Chancellor may go back on his promise to reduce the top rate to 45% from April and possible also introduce a Mansion Tax despite seemingly ruling this out some time ago. The idea of a mansion tax was high on the agenda of some in the Coalition but this now looks to have been kicked into touch perhaps once and for all. Likewise and as promised in March, the top rate will be reduced to 45% from April 2013. There will be welcome (although small) increases in the CGT exempt amount and in the IHT nil rate band.

There was however a further reduction is pension limits

which was widely predicted. The lifetime allowance is to be reduced to 1.25m from 1.5m and the annual allowance will go down to 40,000 from 50,000. Also, currently uncapped tax reliefs will in future be limited to 50,000 or 25% of an individuals income.

On compliance and anti-avoidance, the General Anti Abuse rule (GAAR) will go ahead and the planned improvements in HMRCs abil