Budget 98 - Chancellor attacks tax avoidance

Labour continued its crackdown on tax avoidance this week in a Budget riddled with clampdown clauses, writes Jonah Bloom.

The Chancellor promised to deliver a general anti-avoidance rule soon and included a number of specific measures.

Banks were the target of a double-taxation relief clause. From now on financial traders receiving interest on loans made overseas will get double tax relief only on the difference between interest received and the funding cost of the loan.

Offshore trusts set up before March 1991 were hit too. Previously gains from such trusts were taxed only if the money was brought into the country; from now on all gains will be liable for taxes. ‘This looks like retrospective taxation, and that is always regrettable,’ said Maurice Fitzpatrick, partner at Chantrey Vellacott.

There were also changes to protect over #1.5bn of annual lost VAT revenue, including measures to combat traders exploiting the interaction between relief available for the transfer of a business as a going concern and other reliefs.