Budget 2014: Osborne targets tax avoiders

The screws were tightened on tens of thousands of tax avoiders on Wednesday after George Osborne demanded £4bn of upfront payments, in a move he said would “fundamentally reduce the incentive to engage in tax avoidance in the future”.

The move will hit about 65,000 financiers, celebrities, entrepreneurs, and other users of tax avoidance schemes, triggering protests from the taxpayers and their advisers who say the action is retrospective and unfair.

The measure is expected to bring forward £4bn of tax payments over the next five years, making it the single biggest source of additional revenues over the period unveiled in the Budget.

Mr Osborne said he was targeting the “small minority” of wealthy people who do not pay their taxes, adding that “public tolerance for those who do not pay their fair share evaporated long ago”.

The measure escalates the Treasury’s efforts to stamp out aggressive tax avoidance by tackling the cash flow advantage secured by users of certain schemes, even when these are expected to fail in the courts.

The proposals triggered criticism from advisers and professional institutes. Jason Collins, head of tax at Pinsent Masons law firm, said: ”This is an audacious move. The current backlash against tax planning is allowing them to push this change through without proper consideration.”

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants said the retrospective measure was “a particularly punitive approach to tax”. He said: “The problem with this approach is that people simply won’t have the money available to pay a tax bill going back as far as a decade that could actually turn out to be wrong.”

But Mr Osborne brushed aside criticism in his Budget speech saying: “If people feel they’ve been wronged, they can of course go to court. If they win, they get their money back with interest.”

The Budget costings show that HMRC is expected to agree managed payment plans on a case-by-case basis which will result in some payments getting spread over time.