Tax avoidance proposal attacked

GOVERNMENT PLANS to reduce corporate tax avoidance by introducing a general anti-avoidance rule could put overseas businesses off investing in Britain, warn accountants.

John Whiting, a partner with PricewaterhouseCoopers and a spokesman for the Chartered Institute of Taxation, reacted to yesterday's publication by the Inland Revenue of a consultative document on the issue by saying there was a danger it would put a greater burden on business, particularly as companies would also have to cope with the introduction of self-assessment.

Iain Stewart, corporate tax partner at KPMG, agreed there was a risk to Britain's competitive position. Pointing to the lack of detail in the paper, he said there was a need to know "what the Government thinks is legitimate tax planning".

Tax experts point to a number of potential problems with the rule. First, there would be a need for a system whereby companies could clear schemes, which would be costly for the Revenue to administer. Second, the test that would be used - essentially, whether a scheme has a commercial purpose other than to avoid tax - would inevitably be subjective. Companies have until the end of the year to submit comments.