Article by Lakshmi Narain, Director, Tax Services, Baker Tilly. This article appeared in the September 2006 issue of Tax Adviser.
The requirement to disclose innovative tax planning arrangements has been with us for the past two years. HMRC are, based on statements made in various meetings, clearly happy with what it has achieved so far. They have, however, indicated a concern that there are gaps in the system. Detailed evidence has not been made public; no doubt some is anecdotal and some is based on undisclosed planning proposals coming to light through various sources.
The more sophisticated promoters are, apparently, obtaining professional advice from Counsel supporting non-disclosure. Subject to the usual caveats, such advice would be a strong defence in any penalty proceedings. In consequence, HMRC have taken the opportunity to tighten up the 'filters'. Indeed, the filters are being removed and replaced by hallmarks. Some of the hallmarks are, however, merely rebadged filters (confidentiality, premium fee, off-market products): the king is dead, long live the king!
The confidentiality filter (now, two hallmarks) has been refined and clearly will now be exceedingly difficult to circumvent. Further, HMRC have stated that, if necessary, the hallmarks will be supplemented or refined in the light of the effectiveness of the new regime.
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September 2006 by