Hammond’s tax dodge fightback targets £4.8bn by 2022-23

The Government has outlined a raft of measures aimed at tax cheats and designed to bring billions of pounds into the public purse.

Internet companies that legally avoid taxes by shifting profits overseas are the main target, with measures designed to tax royalties on UK sales in a move dubbed the “Google tax”.

The initiative, predicted to raise about £200m a year, forms part of the government’s latest package to tackle tax avoidance and evasion, which the chancellor predicted would raise a total of £4.8bn by 2022-23.

There has been international criticism of the taxes paid by huge digital businesses such as Google and Amazon, which route their profits through low-tax states.

In his budget speech yesterday, chancellor Philip Hammond said: “Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed – and some of these royalties relate to UK sales.

“So, from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales, when those royalties are paid to a low-tax jurisdiction.”

The seven-year plan lists 18 different ways the Government is looking to raise the revenue. These include extending how long HM Revenue and Customs can go back in time to assess non-compliance for offshore tax evaders.

Double taxation relief, where tax relief is generated on losses for both foreign and other offices of a company, will also be restricted from today.

The Government is also looking to crack down on online VAT fraud and will launch a consultation in the Spring to explore how digital platforms can ensure users pay their fair share of tax.

New rules have been raised over the last few years which are attempting to make ‘enablers’ of tax avoidance, including IFAs, liable for penalties.

In his Budget speech, Mr Hammond said that the Government had cut the tax gap by a quarter since 2010, “doing the job Labour failed to do.”

He said the government had secured £160bn in additional tax revenue since 2010, and that his latest steps would raise £4.8bn. The figure includes £2.3bn of additional tax revenues brought in after committing £155m in new resources for HM Revenue & Customs.

HMRC is also benefiting from having the time it has to investigate all offshore tax non-compliance extended to 12 years, in the Treasury’s response to offshore exposés such as the Panama and Paradise Papers.

The government will also publish a consultation on the proposal that designers of offshore structures that could be misused to evade taxes will be required to notify HMRC of these structures and the clients using them.

Frank Field, the Labour MP who chairs the Commons’ work and pensions committee, and who has led a series of campaigns highlighting tax avoidance, said: “The budget offers the beginnings of a fightback against some of the most egregious and morally bankrupt methods of tax avoidance exposed by our campaign.

“But taxpayers will expect a whole series of additional steps to follow, if this mega injustice is to be countered for good.”