A tax planning clampdown on aggressive tax schemes have been announced by Theresa May’s new Government. It is estimated that each year Billions of pounds of tax revenue that should be paid is lost due to complicated and aggressive tax planning schemes.
The Government has tightened up on tax evasion over the last few years and a number of “Celebrity Tax evasion” cases have received a lot of press coverage.
The Treasury has invested £1 Billion over the last few years addressing tax evasion, however they felt that this needed to go further.
In an announcement yesterday, the Financial Secretary to the Treasury, Jane Ellison confirmed that:
“People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay. The vast majority of their schemes don’t work and can land their users in court facing large tax bills and other costs. These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market.”
Making Accountants, Tax Planners an Advisers accountable
Up until now businesses promoting this advice have not received any recourse or comeback in relation to this type of tax evasion. High fees and commission were normal on this type of arrangement with the client bearing the cost. The aim of the consultation is to deter Tax advisers, accountants and financial advisers from encouraging clients to invest into complicated and risky schemes that are specifically designed to avoid tax.
Part of the plan is to levy penalties on advisers that recommend such schemes. The penalty could be up to 100% of the tax that should have been paid.
The Government has confirmed that the majority of advisers do not recommend these types of arrangements, but a minority still operate in this area. After the 2015 budget the Government recommended that the regulatory bodies responsible for tax and accountancy should raise standards in this area. Since then the industry has been working hard by strengthening their professional conduct standards in relation to taxation. In addition, a code of practice on taxation for banks was introduced in 2009.
Traditional tax planning still acceptable
The government has confirmed that traditional and proven tax planning methods such as Pensions, Individual savings accounts and trust planning will still be acceptable. This is good news for clients and reassuring, as it gives advisers an outline of the types of planning that is not classed as tax evasion.
Our view and Stance
We have been aware of the HMRC’s concerns over these types of schemes for a number of years. The Revenues disclosure of tax avoidance schemes legislation (DOTAS) has highlighted the issue and an impending tax planning clampdown in the area. We have always believed in the long run that ultimately it would be the clients of these schemes that would suffer financial loss and penalties.
As a consequence, we have never recommended these type of arrangements to our clients.
The government has produced a consultation paper on the proposed penalties for accountants and tax advisers. A copy of the paper can be accessed under the www.gov.uk website under strengthens tax avoidance measures
Choosing the correct Ethical or Socially Responsible investments will depend on your own beliefs and values. A starting point is to use a screening process.This will help you to analyse which types of industries and companies they would like to either include or exclude.
There are primarily two types of screening, positive and negative.
The process of Negative Screening excludes investments that you might consider undesirable. For example you might want to exclude some of the following:
Positive screening helps to identify the businesses that demonstrate the potential to offer good quality, long-term ethical investment opportunities. The positive screening process will help you to avoid businesses that could encounter problems as their day to day operations might not be sustainable in the long term. Positive Screening might include companies involved with
By employing active shareholder engagement it is possible for shareholders and fund managers to encourage a more corporate and social business approach.
It makes sense to consider investing into companies that have the foresight and willingness to adapt.
Anyone seeking evidence that investment decisions can be hard often needs to look no further than the front page news. China, oil, VW and Glencore are among the assets that have made the headlines in the past few months after suffering sudden, unexpected and dramatic changes in price.
Investors with exposure to those volatile assets might be licking their wounds and reconsidering their positions. This is because many investors have an investment strategy that relies on their (or someone else’s) forecasts about the future. In the simplest terms, their starting point is a blank sheet of paper, where they build a portfolio of assets they think will do better than the alternatives. Sometimes those decisions are right; sometimes they are wrong.
We have a different starting point. Our investment philosophy is based on things we know rather than things we don’t know. For example, we know that financial markets do a good job of setting prices, so we don’t try to second-guess them. Instead, we begin with the belief that investors will, on average and over time, receive a fair return for investing their money.
Our aim is to give our clients access to that long-term return through broadly diversified, low-cost portfolios of assets that aim to beat the market average. The portfolios do this by using information in market prices that tells us about a security’s characteristics and its expected future returns.
The decisions we make about what assets to hold are based on decades of academic research rather than short-term hunches. This means we can focus on meeting your long-term goals rather than becoming absorbed by short-term market movements.
Generally speaking, investment decisions are hard, but if, like us, you start with information you know is backed by decades of evidence and build an investment philosophy and strategy around it, we think you can improve your chances of being a successful investor.