Tax avoidance
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Promoters of certain types of tax avoidance schemes will have to
provide details to the Inland Revenue shortly after selling a scheme,
including the types of transactions planned and their tax consequences.
Taxpayers using schemes from offshore promoters will have to disclose
details themselves shortly after buying or using the scheme. The
starting date for this provision will be announced in the Finance
Bill.
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Tax compliance initiatives
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The Inland Revenue will receive extra funding to focus more effectively
on taxpayers who do not comply with their tax obligations. A package
of measures will include better publicity to raise public awareness
of tax obligations, new data systems to analyse tax compliance issues,
tackling the black economy and more specialist staff for high risk
areas involving large businesses and individuals with complex tax
affairs.
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Partnership tax avoidance
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Tax will be imposed on investors in film schemes who make disposals
after 9 December 2003 to avoid income tax on future income.
The partnership losses of non-active partners will be restricted
to the amount actually contributed to the business. Disposals of
future income streams by non-active partners will be taxed. Both
measures take effect from 9 February 2004.
Corporation tax will be charged where a company shelters taxable
profits in a realisation of its share of a partnership interest.
The charge will be on realisations that comprise untaxed profits
arising after 16 March 2004.
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Simplified tax return
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Individuals who receive tax returns but have simple tax affairs
will be able to complete a four-page tax return with no supplementary
pages. Taxpayers who receive the short form, based on information
in the previous year's return, will have to check they are still
eligible. The simplified return will benefit many pensioners and
people with small amounts of income from property, investments or
businesses.
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Jointly owned assets
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If shares in a close company are jointly owned by a husband and
wife, the income distributions (normally dividends) will be taxed
according to the actual ownership of the shares rather than automatically
split 50/50. The change will take effect from 6 April 2004.
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Pre-owned assets
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A free-standing income tax charge will apply from 6
April 2005 to the benefit an individual receives from having the free
or low cost enjoyment of assets which they formerly owned.
The charge will broadly follow the benefit in kind rules and will
be subject to a de minimis threshold of £2,500 of benefit.
A range of exemptions will apply, including an exemption for all gifts
made before 18 March 1986 (the starting date for inheritance tax).
Transitional relief will allow those caught by the new rules to elect
by 31 January 2007 that the property falling within the income tax
charge will instead be regarded as part of their estate for inheritance
tax purposes.
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