Review of 2014

And so we arrive at the end of 2014. A momentous year for tax? Well perhaps. It may not have brought all the answers, or even really got to the bottom of some of the questions, but it certainly wasn’t dull!

Here are a few of my observations on the key events. This is not intended to be an exhaustive list, or even the definitive list of the most important announcements, but just a reminder of some of the milestones we have passed in the last 12 months.

Enjoy, but please also feel free to comment on any other landmarks you think should be included.

January

HMRC issued a consultation document on “Tackling marketed tax avoidance”. This included the up-front tax payments on disputes, which elicited a range of responses. But still, there is nothing like a good consultation to get the year off to a flyer!

January also saw Pascal Saint-Amans set out the plans for OECD BEPS for the year. “The time is ripe for the business community and governments to work together to achieve a fairer, more effective and more efficient international tax system that provides a 'win' for everyone.” Perhaps we should come back to look at this at the end of 2015…

February

As well as public protestations in response to the HMRC consultation, this month brought us former Radio 1 DJ Chris Moyles as the latest celebrity to be accused of using an aggressive tax avoidance scheme. In this case he was found to have racked up £1 million in losses on the sale of £3,731 worth of used cars via the Working Wheels scheme.

February also saw the launch of the Fair Tax Mark, the world's first independent accreditation process which supports those companies making a genuine effort to be open and transparent about their tax affairs.

March

So we had a Budget full of tax measures.  The proof of the pudding is in the eating. This Budget seemed to contain puddings, the eating of which won’t happen for quite some time (so proof will have to wait), and puddings I’m sure we have already been served before, and which have been brought back to the table as though they were a new offering.

These puddings included the consulted up-front payment of disputed tax and of course the “Google Tax”. In the case of the “Google Tax”, it appeared that we would only get to taste this morsel at the end of the year. It was almost as though they hadn’t really thought about how it would work….

April

In the wake of reported fall in sales at Starbucks, deemed to be a result of the bad publicity around tax avoidance, Starbucks Corp announced plans to move their European HQ to the UK. Before hanging out the bunting, it is worth noting that there are those who have suggested that the additional UK tax which might be paid by Starbucks may well be less that the tax they have been paying in the Netherlands. So actually, this is a move that may reduce their overall tax burden. Hmmm.

May

In this month it was announced that 3 out of 5 members of Take That had been involved in the so-called “Icebreaker” tax avoidance scheme. This allegation proved to be incorrect, as in the subsequent months it became 3 out of 4, and then with the departure of Jason, 3 out of 3! Please submit your Take That related puns, on a postcard, to….

Oh, and then there was the small matter of the Taxation 2014 Tax Awards. The announcement of the Tax Personality of the Year rarely raises much more than a ripple of polite applause. This year was the exception, as the announcement of Margaret Hodge as the winner was greeted in the room with unusually strong emotions…

June

In an interesting move, which added a new facet to the tax avoidance debate, the European Commission launched an investigation into whether certain EU states were in breach of State Aid rules by offering tax incentives to certain multinationals. The challenges, aimed at Apple/Ireland, Starbucks/Netherlands and Fiat/Luxembourg were met with a mixed reception. While some welcomed this as another line of attack in the fight against tax evasion, others commented that the Commission (and the EU Courts) are badly placed to rule on the complexities of national tax law, let alone to have a feel for whether particular deals were sensible ones for hard-pressed tax authorities to reach at the time.

July

Leaked documents reveal over 1,600 people (including George Michael, Mel Gibson and Katie Melua) who allegedly tried to shelter over £1 billion using tax avoidance schemes. A week later HMRC released a list of more than 800 schemes it believes are deliberately designed to avoid tax. With an expected 30,000+ people expected to receive a virtual knock on the door from HMRC, the question remains as to why these 30,000+ people had not been challenged before, and what the government might do with the supposed windfall.

August

Something a little more UK-centric, but evidence that at least part of the tax regime is being dragged, kicking and screaming into the 21^st century, with the car tax disc being abolished. Just don’t ask too many probing questions about the period of up to a month you can’t claim back on your old tax disc when you sell a car. I’m sure the government will put the extra revenue to good use…

September

The OECD published seven reports as part of the BEPS project, over 700 pages. The general feeling was that OECD had achieved more that many commentators had expected in the timescale. However, that was clearly at the expense of pushing many of the trickier issues in the Year 2.

We also saw a wave of G20 leaders endorsing anything that stood still long enough to be endorsed. There is nothing like a good statement in support of a nebulous proposal to help in the polls.

October

Ireland announces the closure of the “Double Irish” structure, although the timescale for this, running through to 2020, left many thinking that this was not really a meaningful step forward, as it is likely the outcomes of BEPS will arrive first.

November

The Lux Leaks disclosures brought the debate around the role of Luxembourg in the international tax planning and avoidance debate into sharp focus. That focus was particularly felt by PwC and of course EC President Junker, with some very vocal calls for him to resign or be sacked. He didn’t, and wasn’t.

December

The Diverted Profits Tax (or to give it its official title, the Slightly Uncertain Google Tax) is announced. It brings with it a wave of concern about whether it is strengthening or undermining BEPS, and left a couple of notable pundits getting rather hot under the collar.

With Denmark and others looking to introduce unilateral reforms, the OECD approach of multilateral measures seems to be a on slightly shaky ground come the end of the year.

And so that was 2014. As I said, this is not an exhaustive summary of the year, and I’m sure there are those jumping up and down at obvious omissions. My suggestion? Let me know what you think is missing. Alternatively, enjoy the New Year, put on some loud music and jump up and down to that instead.

And what will 2015 hold? A good question. There will clearly be a lot of BEPS consultations. That we know. We will also learn more about the Diverted Profits Tax, and may well see more unilateral tax measures from other countries.

I think 2015 will be a busy year for all. Those designing or using aggressive tax avoidance schemes will be sitting uneasily. The rest of the business community will be trying to understand possible unintended consequences of new rules.

There is a threat facing those businesses that have chosen a more aggressive tax strategy. But equally there is an opportunity for responsible businesses to differentiate themselves.

All that, plus more BEPS, CCCTB, beneficial ownership, CBCR and a UK General Election.

It promises to be an interesting ride. Don’t look away!