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Govt promises retrospective tax only for ‘exceptional circumstances’

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31/08/2012
The government has promised it will only implement changes to tax legislation retrospectively in “wholly exceptional circumstances”, after concerns were raised that it could damage the UK’s reputation.
Govt promises retrospective tax only for ‘exceptional circumstances’

In his budget earlier this year, George Osborne (pictured) said the government would move “swiftly, without notice and retrospectively” to make sure anyone buying property for residential purposes does not circumvent stamp duty rules.

With a number of other measures also confirmed to prevent avoidance, the Treasury Select Committee asked the government to clarify its stance on retrospection.

Meanwhile, John Whiting, director of tax policy at the Chartered Institute of Taxation, suggested retrospection had “great potential to do damage to the image and reputation of the UK’s tax system”.

Responding to the committee, the government attempted to assuage MPs’ fears, although it did not commit to consulting on the issue, as suggested.

“The government agrees that changes to tax legislation where the change is to have effect from a date earlier than the date of announcement should be restricted to wholly exceptional circumstances,” it said.

“The government’s announcement of retrospective legislation on 27 February 2012 was an appropriate and proportionate response to an aggressive tax avoidance scheme.

“Previous ministerial announcements made it clear that the government’s policy and intention in introducing the legislation was that the profits in question were intended to be taxed.”

Andrew Tyrie MP, chairman of the Treasury Select Committee, welcomed the government’s clarification.

“Retrospection conflicts with the principles that should underpin tax policy as recommended by this committee and as laid down by the Chancellor,” he said.

“It would also undermine the reputation of the UK as a high-quality place to do business.”

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