2014 Budget: Apocalypse: the Budget to end all Budgets...

Practical Law UK Articles 4-560-8345 (Approx. 32 pages)

2014 Budget: Apocalypse: the Budget to end all Budgets...

by Naomi Lawton

Prologue

The force of the explosion from the red box knocked the young George Osborne from his feet and against the Commons bar (currently propped up by the wife of one of his colleagues). Dazed and confused, George staggered to his feet, noting as he did so his bloodied temple.

"I ain't got time to bleed" he muttered, and steeled himself for imminent enemy attack. Ed Balls narrowed his eyes and prepared to charge. Their commanding officers looked on.

Umm...

In fact, this is not what happened. Not even close. In fact, seldom has the red box produced less excitement.

Political context is all

Even the media described this as the "grey Budget" - an attempt to win the support of the significant elderly population with promises of tax breaks. It was a smart move, not least because this section of the electorate can generally be relied upon to turn up and vote.

Given the political context, it could never have been any other way. George Osborne's fifth Budget, this is the year before the general election and the parties are drawing up their policies and preparing for battle. The war-weary coalition government needed to create as many vote winners as possible and to displease as few potential voters as possible. It was an attempt to win hearts and minds, rather than tactics of shock and awe. There was no hope, therefore, of colour and excitement.

(Specifically, how to write an article? When bingo duty is the highlight you know you are in trouble.)

The Big Bertha: accelerated payments of disputed tax

Fortuitously for us all, tax practitioners still managed to find something to comment upon and there were a number of interesting points of view. The measures attracting more comment from corporate tax practitioners than any others were those relating to the accelerated payment of disputed tax in DOTAS and GAAR cases. The government confirmed that provisions in the Finance Bill 2014 will require taxpayers to pay disputed tax up front where the taxpayer has claimed a tax advantage by the use of arrangements that fall to be disclosed under DOTAS or HMRC counteracts the tax advantage under the GAAR. Similar provisions will apply in the context of avoidance cases where the same (or similar) scheme or tax arrangements have been judicially defeated in another party's litigation.

Hartley Foster (Field Fisher Waterhouse LLP) described the measures as a "further weapon in HMRC’s ever-burgeoning arsenal of measures". Angela Savin (Norton Rose Fulbright LLP) pointed out that "[t]hese measures will fundamentally shift the economics of tax avoidance". Although taxpayers who ultimately succeed in litigation will be able to reclaim the tax together with interest, Nick Skerrett (Simmons & Simmons LLP) makes the point "that of course assumes the taxpayer is adequately solvent to pay the demand".

Charles Goddard (Rosetta Tax LLP) described it as a "requirement that any user of a disclosed tax avoidance structure must pay the tax up front, so that the taxman can use it to fund litigation to make sure it doesn't work. Surely a case of jam tomorrow or jam yesterday – but never jam today."

Liesl Fichardt (Clifford Chance, LLP) was concerned that the resulting significant increase in litigation would result in "great cost to [HMRC] and taxpayers, and will be incurred long before the substance of the tax dispute is considered and determined by a court". Andrew Prowse (Field Fisher Waterhouse LLP) agreed: "One wonders whether the cash-flow advantage from [Advance Payment Notices] will make the speed of progress of tax cases even more like sailing into the wind than now". Vimal Tilakapala (Allen & Overy LLP) made the point that "There is also the fear that HMRC may be less willing to settle tax disputes in future, given that it will already have receive payment of the disputed tax".

In terms of procedure, David Pickstone (PwC Legal) noted that "[t]hese payment notices would be available to HMRC as soon as they open an enquiry; something that doesn’t sit very well with the self-assessment rules, which require tax to be formally assessed before it falls due and payable". Heather Corben (King & Wood Mallesons LLP) also noted the "retrospective" nature of the provisions.

Ashley Greenbank (Macfarlanes LLP) commented that the fundamental philosophy behind the DOTAS legislation (that there is no penalty for having entered into a scheme provided disclosure obligations are met) is "changed markedly by this proposal. Taxpayers will have to think more carefully before making a disclosure". Rupert Shiers (Hogan Lovells International LLP) made a similar point: "The widening of DOTAS was inoffensive when it was merely an information regime. Under the current proposals, its mere application can stop tax collection from being based on the current self assessment".

HMRC itself clearly expects the fallout to be considerable. James Bullock (Pinsent Masons LLP) noted that "HMRC openly state that these measures are expected to prompt a range of legal challenges including judicial review and "disputed enforcement activity". They pledge whatever it takes to meet these challenges. On the basis that HMRC is apparently so committed to a robust stance, advisers will have to consider what their response will be to this novel approach".

Avoidance schemes involving the transfer of corporate profits and other weapons of mass destruction

Another measure attracting significant attack from practitioners was the measure providing that if the profits of a group company are, in substance, transferred to a different group company and a main purpose of that is to secure a tax advantage, the transfer will be ignored for the purposes of computing the transferor company's corporation tax.

It is apparent that the intention behind the draft legislation was to stop marketed schemes that circumvent the anti-avoidance rule that denies deductions for payments under derivatives that are essentially transfers of profit (derivative rule). But the provisions, as currently drafted, are much wider than this. HMRC has also published guidance intended to assist in the interpretation of the provisions.

Eloise Walker (Pinsent Masons LLP) writes:

"It is like a hammer the size of Berkshire to crack a hazelnut. Or, maybe, a disguised bazooka aimed at adding to HMRC’s arsenal in the war against BEPS – you decide … BUT this new legislation is unbelievable widely drawn. Yes, the guidance has a few examples of arrangements that shouldn’t be hit, but this is a worrying example of HMRC’s growing trend to put out widely drawn legislation and then expect us all to rely on guidance for comfort. In light of Gaines-Cooper, how much comfort is that?"

Richard Carson (Taylor Wessing LLP) agreed that the provisions were "exceptionally broadly crafted, extending it seems to various forms of ordinary distribution. It appears wrong that taxpayers making such payments should have to rely on an absence of tax motive in order to exclude the operation of this provision and it should at least be made clear that the effect cannot be to bring into charge profits that have already been taxed". Brenda Coleman (Ropes and Gray International LLP) described it as "in effect another GAAR, but without the protection of the double reasonableness test and the Advisory Panel".

Chris Bates (Norton Rose Fulbright LLP) argued that "business is entitled to legislation which is clear and certain so that it can work out the tax it owes. This new measure does not deliver that." David Harkness (Clifford Chance LLP) thought that the measures would "cause significant concern to taxpayers in relation to ordinary commercial transactions". Philip Harle (Hogan Lovells International LLP) concluded that it was "disappointing but not surprising to see another ridiculously widely drafted anti-avoidance rule".

Taking a slightly different approach, Charlotte Sallabank (Jones Day) thought it would be "interesting to see how the BEPS proposals interact with this legislation". Meanwhile, Susan Ball (Clyde & Co LLP) observed that "as expected, the existence of the GAAR has not yet done anything to reduce the amount of specific anti-avoidance legislation being introduced, especially in complex areas".

Changes to the taxation of limited liability partnerships: a continuing conflict

Inevitably there was plenty of outrage that the proposed changes to the taxation of partnerships – due to come into force in April 2014 despite much criticism – had not been deferred. Martin Shah (Simmons & Simmons LLP) noted that "further changes, as yet undetailed, are to be made to the December draft legislation – this is far from the stable and certain tax system to which the UK aspires".

Philip Gershuny (Hogan Lovells International LLP) agreed that it was "disappointing that calls for deferral of the new salaried members rules have fallen on deaf ears". Daniel Lewin (Kaye Scholer LLP) noted "unanimous objection by the Alternative Investment Management Association, the City of London Law Society, the British Private Equity & Venture Capital Association, just about any UK based law firm and indeed the House of Lords".

The ultimate barometer of outrage, Simon Yates (yes, that frustrated tax adviser par excellence from Travers Smith LLP) managed to use the word "disgraceful" three times in one paragraph about the legislative process and resulting legislation.

Erika Jupe (Osborne Clarke) thought that HMRC had thereby created a "rod for their own back …They will be inundated with requests for clearances given the significance for the taxpayer of getting it wrong".

Property wars and the struggle for territory

Tony Beare (Slaughter and May) noted that the Chancellor had continued "to squeeze the property sector, which is not surprising as the UK has historically been somewhat generous to non-resident investors in UK property". Elliot Weston (Lawrence Graham LLP) agreed, stating that "stamp duty land tax (SDLT) and its ugly sister, the ATED, are the taxes that just keep on giving for the Chancellor".

However, Michael Hunter (Addleshaw Goddard LLP) thought that the government's extension of anti-avoidance provisions to dwellings over £500,000 "looked like blatant revenue raising rather than anti-avoidance". Caspar Fox (Reed Smith LLP) noted that "I am surprised that the use of corporates to hold lower-value residential properties is sufficiently widespread to justify the government's estimated tax reviews of nearly £90 million each year from lowering the SDLT and ATED thresholds".

John Challoner (Norton Rose Fulbright LLP) thought that:

"the most surprising thing about the Budget was the continued silence on the introduction of capital gains tax for non-UK residents owning residential property. A consultation paper was promised in early 2014 but the Budget papers merely say it will follow "shortly". Considering the brevity of the initial announcements, with no indication of whether it will extend to, for example, overseas funds investing in large residential portfolios, the delay in putting flesh on the bones is lamentable."

In relation to SDLT, John Christian (Pinsent Masons LLP) commented that "the property industry will welcome the consultation on SDLT relief on authorised property funds… the BPF noted the potential stimulus of the pension changes for property investment funds and it is essential that the SDLT regime does not hinder the launch of funds".

Caring for the foot soldiers: employees and share schemes

There was significant variation in response to the announcement that the proposed tax incentives for employee ownership trusts would not be changed following a consultation on the proposals. The measures, which were announced in the 2013 Autumn Statement, include a new capital gains tax relief for qualifying disposals to an employee ownership trust (see Legal update, Draft Finance Bill 2014: employee ownership measures). In the draft Finance Bill 2014 clauses released in December 2013, the qualifying conditions for such a trust were extremely narrowly drafted and would exclude the majority of existing EBTs.

Graeme Nuttall (Field Fisher Waterhouse LLP) described it as "hopefully, the dawning of a new era". Meanwhile, Barbara Allen (Stephenson Harwood LLP) described the announcement as "disappointing" and noted that it would result in "most employee benefit trusts being excluded".

In relation to share schemes, the changes to approved plan limits and self-certification announced in the 2013 Autumn Statement were confirmed. However, a number of commentators, including Judith Greaves (Pinsent Masons LLP) were unhappy that "frustratingly, the final form of the legislation is not yet available for companies to consider in advance of 6 April, when the changes will have effect".

Karen Cooper (Osborne Clarke) said that "given that the HMRC approval process for CSOP, SAYE and SIP is to be withdrawn in just over two weeks' time, and the revised legislation will only become available on 27 March 2014, we look to HMRC to publish updated guidance on tax-advantaged schemes … as a matter of urgency".

While most of the share schemes announcements had already been well trailed, there were one or two elements of surprise. These included the announcement that, the changes in relation to the income tax, NICs and corporation tax treatment of employment-related securities and options held by internationally mobile employees, and corresponding changes to corporation tax relief, will not take effect until 6 April 2015, not 1 September 2014 as originally planned. This was described by Nicholas Stretch (CMS Cameron McKenna LLP) as a "(welcome) surprise". However, as noted by David Pett (Pett, Franklin & Co. LLP), the new legislation will then be "applied to all outstanding awards and shares held by such employees, whenever acquired".

Pensions: outflanked from the blindside. (But in a good way.)

The announcements relating to pensions certainly amounted to the biggest ambush of the Budget. Specifically, it was announced that the majority of the tax restrictions on how a member of a defined contribution pension scheme can draw their benefit are to be removed with effect from April 2015.

Louise Higginbottom (Norton Rose Fulbright LLP) reported "genuine excitement". The provisions were described by Lesley Browning (Norton Rose Fulbright LLP) as "radical" and by Andrew Loan (Macfarlanes LLP) as a "fundamental recasting".

However, there was a note of caution from Mark Womersley (Osborne Clark), who said that: "not for the first time the government has proposed a major change which may prove too good to be true. The initially generous A-Day tax allowances have since been seriously eroded, and we must now see whether this latest headline grabbing proposal survives closer scrutiny".

David Milne QC (ever the optimist) wondered: "Of course, what happens when you've spent your entire pension pot and are reduced to living on the State pension is another matter. That may be when the Bill which Lord Falconer is introducing into the House of Lords (on assisted dying) gets amended to become part of government policy".

There's planning ahead, and then there’s really planning ahead.

Banks find themselves a (partial) safety zone

Aside from the announcement that a forthcoming consultation would propose a redesign of the charging mechanism for the bank levy, there was what Jonathan Cooklin (Davis Polk & Wardwell LLP) described as an "absence of banker bashing".

Nonetheless, Mike Lane (Slaughter and May) noted that "reviewing the bank levy has replaced painting the Forth bridge as the job that never ends. With the product of last year's review yet to be enacted in this year's Finance Bill, another review is set to be launched on 27 March, this time looking at moving to a system of banded rates".

Mark Sheiham (Simmons & Simmons LLP) thought that the proposed redesign was "presumably intended to make the revenue from the bank levy more constant by preventing most modest reductions in balance sheet size impacting on revenue. But it would also reduce the inventive for banks to de-risk, and create distortions around the borders between the bands".

Cross-border conflict amongst multinationals

As part of the 2014 Budget, HM Treasury and HMRC published a position paper on the OECD Base Erosion and Profit Shifting (BEPS) Action Plan. The OECD Action Plan, published in July 2013, proposes 15 Actions to be taken to strengthen international tax rules. (For further detail, see Articles, The OECD's Action Plan on Base Erosion and Profit Shifting and The OECD’s action plan on BEPS: a taxing problem.)

The view of Geoffrey Kay (Baker & McKenzie LLP) was that the UK government provided "an interesting insight into some of the government's own thinking on the individual actions contained in the BEPS action plan". Nick Cronkshaw (Simmons & Simmons LLP) thought that "the government's stance, supporting multilateral action, is welcome and equally shows that the government is serious in its desire to modernize certain aspects of cross border taxation".

Murray Clayson (Freshfields Bruckhaus Deringer LLP) noted that "one gets the sense that HMG is rather satisfied with the current UK approach to almost all the issues, including our CFC code (despite rude international criticism of its post-reform state as "weak"". In a similar vein, Kate Habershon (Morgan Lewis & Bockius) described the attitude of UK government as "holier than thou". Richard Sultman (Cleary Gottlieb Stein & Hamilton LLP) also noted that "the paper seems to hail the UK code as a model for other countries and suggests that our rules are not expected to require further substantive changes".

Lydia Challen (Allen & Overy LLP) concluded that the report was a "fairly measured interim report on its priorities for BEPS". Despite this, Ben Jones (Eversheds LLP) described the ongoing BEPS project as a "growing shadow for business".

Rules governing the conduct of hostilities

A number of practitioners commented on what the Budget proposals demonstrated about the legislative process.

Tom Scott (McDermott, Will & Emery UK LLP) thought that "the proposals on avoidance schemes involving the transfer of corporate profits show how the legislative process has lost its way. A clearly abusive scheme which one would have thought was attackable under the GAAR or other existing rules gets its own broadbrush antibiotic – with even the HMRC Guidance Note admitting "In practice it is likely that any challenges would be run in parallel". And because the antibiotic impacts a range of less offensive transactions, we need a set of Examples outside the legislation showing what's in and what's out".

Sandy Bhogal (Mayer Brown International LLP) noted the "different results that can arise from the process introduced in recent years as regards consulting on new legislation", comparing the deferral of some of the proposed changes to the loan relationship and derivative rules to the refusal by HMRC to defer the limited partnership provisions.

Other skirmishes

A number of other corporate tax announcements were commented upon favourably. In particular, the increased R&D reliefs were described by Mathew Oliver (Bird & Bird LLP) as a "welcome boost" for many taxpayers. Nikol Davies (Taylor Wessing LLP) also mentioned the increase in the R&D tax credit payable to loss making SMEs as one of a number of "broadly more positive" moves for corporates. Leo Ringer (CBI) thought that the doubling of the Annual Investment Allowance would amount to "a shot in the arm for businesses ready to invest and drive the recovery".

Also mentioned in dispatches was the package of measures for the oil and gas sector. Michael Thompson (Vinson & Elkins LLP) thought that "with the exception of the strange attack on bareboat chartering arrangements for drilling rigs and flotels, other changes coming in this year are part of a welcome package geared to kick-start shale gas exploration". William Watson (Slaughter and May) agreed that "the picture is brighter for oil and gas … the message is generally encouraging".

And in other skirmishes, Colin Kendon (Bird & Bird LLP) described it as "really good news" that shares for rights was not going to be scrapped or modified.

It was announced that the Finance Bill 2014 would contain provisions combatting the use of artificial dual contracts by non-domiciled employees. Darren Oswick (Simmons & Simmons LLP) noted that "[t]he most welcome news is that it appears that the new rules will not apply to income relating to duties performed in tax years prior to 06 April 2014. As a result, it may be the case that deferred compensation awarded on or before but vesting after 05 April 2014 will escape the new rules".

Did anyone win?

It was certainly a safe Budget, and described by Richard Croker (CMS Cameron McKenna LLP) as a "masterly Budget on the political level". However, some of the documentation, including the Finance Bill, has yet to be published. And the most dangerous thing in the combat zone is an officer with a map.

A number of practitioners commented that, for business, a Budget without surprises is a good thing, although Elaine Gwilt (Addleshaw Goddard LLP) conceded that "it does take the bang out of Budget day for practitioners".

David Wilson (Davis Polk & Wardwell LLP) went one stage further, and contemplated the end of the Budget as we know it:

"I wonder: should this be the Budget to end Budgets? The Autumn Statement has increased in prominence with the success of the Government’s "new approach to tax policy making" since 2010. The early publication of draft legislation with greater scope for comment and consultation, is to be applauded – but does the tax (or even political) calendar really need two set piece occasions? We weren’t looking for fireworks, but few City corporate tax practitioners will have been excited by another Budget box of damp squibs."

He is not the only advocate of such an approach. A recent Institute of Economic Affairs press release recommended the abolition of the Budget in its current form. The lengthy consultative process is designed to produce sensible and well-reasoned and well-written tax legislation. This is not well-suited to the drama of the red box and political grandstanding.

Comments in full

Barbara Allen, Stephenson Harwood LLP

"Given the major changes to share schemes announced in the last couple of years, it is not surprising that there is little which is new in the Budget. Of particular interest will be the detail of the technical changes to the provisions on self-certification and online filing to be included in the Finance Bill 2014. It is hoped that the government will have listened to the feedback it has received and ironed out the anomalies in the original drafting. It is, nonetheless, disappointing that the government has left so little time for companies to get to grips with these new measures which come into effect on 6 April 2014.

It is also disappointing that the government has decided not to extend the type of employee ownership trusts which will qualify for tax relief resulting in most existing employee benefit trusts being excluded.

On the plus side, the government has announced it will go ahead and consult on the OTS recommendations to introduce the concept of a "Marketable Security" and an "Employee Shareholding Vehicle". The former, if implemented, would greatly assist private companies offering shares to their employees."

Susan Ball, Clyde & Co LLP

"The changes to the capital allowance and investment allowance rules, and to the RDA provisions, will be welcomed by many businesses, particularly SMEs. The expected review of the construction industry scheme is also promising. Overall, though, there is still too much emphasis on change (even though intended to be improvement) at the expense of stability. As expected, the existence of the GAAR has not yet done anything to reduce the amount of specific anti-avoidance legislation being introduced, especially in complex areas."

Chris Bates, Norton Rose Fulbright LLP

"HMRC's crusade against avoidance keeps on rolling. One new measure announced will cause concern for compliant businesses. A provision announced in the Autumn Statement targeted at profit shifting through the use of that exotic beast of the derivatives world, a total return swap, is to be extended to any arrangement that has the effect of transferring profits. The problem is not that HMRC should not have the power to prevent profit shifting, but that the draft legislation is drafted in such wide terms that its scope is entirely unclear; business is entitled to legislation which is clear and certain so that it can work out the tax it owes. This new measure does not deliver that. The original measure in the Autumn Statement was subject to heavy criticism for its lack of clarity and that was addressed with revised drafting. Astonishingly, the lessons from that experience have been ignored in relation to the new measure."

Tony Beare, Slaughter and May

"There were few significant developments in this week's Budget.

For the most part, the Budget press releases simply confirmed the legislative changes that had previously been announced.

The Chancellor continues to squeeze the property sector, which is not surprising as the UK has historically been somewhat generous to non-resident investors in UK property. The Chancellor confirmed that, with effect from April 2015, non-residents disposing of UK residential property would be subject to capital gains tax. In addition, the threshold at which the 15 per cent SDLT rate for certain residential property transactions has been reduced from £2 million to £500,000 and the same reduction will apply to the ATED, albeit on a phased basis from April 2015.

Other points of interest were:

(a) an expansion to the rules preventing arrangements in relation to the transfer of profits for tax avoidance reasons. The government had a go at this last year but it would seem that, in confining its attack to transfers of profits through derivative contracts, it set the net too narrowly;

(b) very few of the changes resulting from the ongoing consultation in relation to the modernisation of the loan relationship and derivative contract rules are to be enacted this year. Of the two areas that are to be covered this year, the extension of the de-grouping rules to include the recognition of losses is to be welcomed. It has long been anomalous that only profits and not losses fell to be recognised on exit; and

(c) also welcome is the exclusion of research and development allowances from the anti-loss-buying rules that were introduced last year. This should help to encourage capital investment in research and development."

Sandy Bhogal, Mayer Brown International LLP

"Not a huge amount for the business community to get excited about. A number of previously announced measures affecting the asset management industry and the banks meant that, as has been the case in recent years, the financial services sector has something to like and complain about. The pensions changes were a much trumpeted part of the package and look distinctly like a political ploy designed to bring the middle classes back to the government in time for the next election.

However, perhaps the most interesting thing to note is the differing results that can arise from the process introduced in recent years as regards consulting on new legislation. A number of the proposed changes to the loan relationships and derivatives rules which were timetabled by HMRC for 2014 have been put back to 2015 after the potential complications of the process became clear during the initial round of consultations. This is an excellent example of HMRC cooperating with, and listening to, the business community and the result is a more appropriate timetable to consider changes to this important area. Compare that to the new rules on limited liability partnerships with so called "disguised employees" and/or corporate members. What started as an attempt to deal with specifically identified issues has now evolved into a revenue raising measure which captures far more businesses than originally envisaged (and even prompted the House of Lords to scold HMRC) and which will likely raise nowhere near as much tax as HMRC expects. As the government now seeks to consult on aspects of the OECD BEPS project (particularly hybrid arrangements), one hopes that the former rather than the latter example is the result."

James Bullock, Pinsent Masons LLP

"Overall it wasn't a terribly exciting Budget and rather reflected the fact that the coalition government is reaching the end of its term. There are some "big picture" issues, such as wholesale pension reform - and a review of the tax regime for the continental shelf - which will keep practitioners focusing on those areas very busy, but otherwise a lot of "tinkering". Perhaps most interesting of all - if expected - was the proposal for accelerated payments to apply in respect of arrangements subject to DOTAS - and in due course which fall foul of the GAAR advisory panel. HMRC openly states that these measures are expected to prompt a range of legal challenges including judicial review and "disputed enforcement activity". It pledges whatever it takes to meet these challenges. On the basis that HMRC is apparently so committed to a robust stance, advisers will have to consider what their response will be to this novel approach."

Lesley Browning, Norton Rose Fulbright LLP

"The Government's proposals for allowing more flexible access to pensions savings from April 2015 are radical and are intended to be popular with individual savers.

The proposals are likely to rekindle interest in pensions savings for individuals who were deterred by the cost of buying annuities. The changes will give a boost to income drawdown which has very much been the preserve of higher earners and create work for financial planners.

One can expect businesses to consider amending their defined contribution occupational pension schemes to take advantage of the proposed flexibility from 2016 and the interim flexibility from 27 March 2014. There may also be interest in allowing flexible drawdown for AVCs paid under a defined benefit scheme."

Richard Carson, Taylor Wessing LLP

"While the headline-making changes were very much in the arena of personal taxation (especially savings and pensions), the announcements affecting the corporate sector are noteworthy more as a snapshot of current tax policy than for the particular measures coming into immediate effect.

On the reform of the corporate debt and derivative contracts regimes, it seems that common sense has prevailed and changes to the rules governing loan relationships and derivatives held by a partnership will (along with the main anti-avoidance reforms) be deferred to Finance Bill 2015. It always seemed very awkward and prone to error (of both principle and drafting) to legislate in this sort of area before taking decisions on the more fundamental reforms of the system next year. The upshot is that there will now be only very limited changes in 2014.

Less promisingly, the new and not so improved legislation on "avoidance schemes involving the transfer of corporate profits" takes immediate effect and is exceptionally broadly crafted, extending it seems to various forms of ordinary distribution. It appears wrong that taxpayers making such payments should have to rely on an absence of tax motive in order to exclude the operation of this provision and it should at least be made clear that the effect cannot be to bring into charge profits that have already been taxed.

Looking at the bigger picture, however, UK multinationals in particular might take comfort from the tone of at least some of the paper summarising UK priorities for the BEPS project. For instance, there is confirmation that further changes to the UK's CFC regime are unlikely, as well as an indication that the UK government may not be keen to see a proliferation of "limitation on benefits" articles in the UK's treaty network."

Lydia Challen, Allen & Overy LLP

"This was a comparatively light Budget, at least if you are not a UK individual with a pension or a taste for bingo or beer. Most of the significant changes had been signalled in advance. However, investors in UK residential property are still waiting for detail as to the government's proposals on the extension of capital gains tax to non-residents, and the unexpected move of the threshold for the 15% SDLT charge on transfers of residential properties to "non-natural persons" and the ATED regime will mean that a number of investors will now have to consider the applicability of these rules for the first time. No significant changes to the corporate tax system were announced yesterday. Instead, the government gave us a fairly measured interim report on its priorities for BEPS. The UK fully supports much of the OECD work, e.g. on preventing artificial avoidance of permanent establishment status. However, it seems less keen to tinker about with its CFC rules as it thinks it has completed this work and those rules are, in any event, subject to EU law requirements. Instead, the government would prefer to reform the transfer pricing rules to address BEPS issues.

The government also expresses initial views on the action points that touch on financing arrangements. In relation to hybrid mismatch arrangements, the government would prefer to deny the deduction first and only tax the receipt if the payer's jurisdiction hasn't denied the deduction. There is a word of warning that regulatory capital of financial institutions will need to be considered in the context of this regime, although the government will be mindful of the regulatory constraints put on the financial sector. This is consistent with Chancellor's upfront statement that the banking sector should not be unfairly advantaged or disadvantaged by the introduction of the BEPS rules. Regarding the work on limiting base erosion through restricting interest deductions, although the UK appears to be relatively open minded, it has set some boundaries - it wants to protect industries that are highly leveraged by their nature and also the financial sector."

John Challoner, Norton Rose Fulbright LLP

"So far as real estate is concerned, the most surprising thing about the Budget was the continued silence on the introduction of capital gains tax for non-UK residents owning residential property. A consultation paper was promised in early 2014 but the Budget papers merely say it will follow "shortly". Considering the brevity of the initial announcement, with no indication as to whether it will extend to, for example overseas funds investing in large residential portfolios, the delay in putting flesh on the bones is lamentable."

John Christian, Pinsent Masons LLP

"The property industry will welcome the consultation on SDLT relief on authorised property funds. There has been uncertainty around the SDLT position on property authorised investment fund (PAIF) conversions and launching a seeding relief will encourage the use of PAIF vehicles. The BPF noted the potential stimulus of the pension changes for property investment funds and it is essential that the SDLT regime does not hinder the launch of funds.

It is good to see that the government has deferred the introduction of changes to the loan relationships regime for partnerships until 2015. Partnerships have always been a difficult area under the loan relationships rules and the proposals, particularly on changes in profit sharing, need further consultation."

Murray Clayson, Freshfields Bruckhaus Deringer LLP

"Aside from Mr Osborne's amusing trailer for the Magna Carta anniversary, and lots of vigorous pensions-related activity, a Budget day highlight was profit shifting. Not only did the government publish its own mission statement and a BEPS TAAR, but evidently the Chancellor had adroitly orchestrated the OECD into supplementing an otherwise modest stack of Budget paper with 93 pages of BEPS Action 2 (hybrid mismatch arrangements) material. The new domestic profit shifting rule has a whiff of transfer pricing about it, and there is likely to be some overlap of the commerciality dimension of the arm's length principle and the tax avoidance purpose angle in the TAAR. EU and treaty discrimination aspects may also emerge as practical cross-border cases are worked through. The target is arrangements resulting "in substance" in a payment by a corporation tax payer of all or a substantial part of its profits to an affiliate. In essence, a deduction is then denied for the payment. Obviously, expenses incurred in making profits are inherently not payments of "profits". It is not totally clear which (otherwise deductible) payments will "in substance" represent distributions of profits. Various not very reassuring examples are provided. On BEPS-proper, the "UK priorities" paper is enthusiastically supportive of the 15 point Action Plan, though one gets the sense that HMG is rather satisfied with the current UK approach to almost all the issues, including our CFC code (despite rude international criticism of its post-reform state as "weak")."

Brenda Coleman, Ropes & Gray International LLP

"I am very concerned about the scope of the new rules relating to the transfer of corporate profits. The breadth of the rules is such that group financing arrangements and dividends may be regarded as profit transfer arrangements. The taxpayer is once again relying on a tax avoidance purpose not being established. However the scope of the rules is so wide that it is in effect another GAAR but without the protection of the double reasonableness test and the advisory panel, and over reliant on HMRC examples of what they regard as caught by the rules (assuming more examples are forthcoming)."

Jonathan Cooklin, Davis Polk & Wardwell LLP

"The Budget speech was a thin one for multinational groups - this was a Budget for savers and pensioners after all - and even in the detailed papers there was relatively little for those groups that hadn't already been announced. Although the government clearly sees the BEPS project as a matter for international cooperation, BEPS is referred to in the context of unilateral measures relating to shifting of profits within groups (a new anti-avoidance rule which surely overreaches), a limited tightening of some aspects of the CFC code and proposed regulations relating to Solvency II hybrid debt for insurers. It's also always interesting to see a Chancellor, ever optimistically, attempting to use the tax system to help unlock business investment by announcing changes to, among others, AIA, SEIS, R&D tax credits and enterprise zones. The absence of banker bashing is both unexpected and welcome. All in all not a bad Budget for business. However, the decision to plough ahead with the (frankly, deeply flawed) changes to the taxation of members of UK LLPs next month is incredibly disappointing."

Karen Cooper, Osborne Clarke

"As expected, there will only be minor amendments to the draft legislation previously published on the simplification of tax-advantaged schemes. The new registration and self-certification procedures for employee share schemes will come into effect as planned from 6 April 2014.

Given that the HMRC approval process for CSOP, SAYE and SIP is to be withdrawn in just over two weeks' time, and the revised legislation will only become available on 27 March 2014, we look to HMRC to publish updated guidance on tax-advantaged schemes (in particular, the "grey areas" such as the priority of certain SAYE leaver provisions) as a matter of urgency. This will be especially important for companies seeking to adopt plans shortly after the new regime comes in, as it will impact on the drafting of the rules.

There are also some administrative matters for HMRC to confirm, for example releasing the new EMI 1 form and the online arrangements which employers will need to use for notifying HMRC of the grant of EMI options."

Heather Corben, King & Wood Mallesons LLP

"The wide powers that HMRC will have to require taxpayers to pay tax upfront where a tax planning arrangement has fallen to be disclosed under DOTAS are of concern. This retrospective change is being proceeded with despite the strong representations made about it by a number of professional bodies."

Richard Croker, CMS Cameron McKenna LLP

"A masterly Budget on the political level. Without giving much money away there is a sense of forward momentum in line with recent economic growth, with pensioners liberated from the constraints of annuities, prudent incentives to savers, and enough encouragement to invest for small business. The traditional Tory vote will be reminded why they favour this kind of government. The increase to the personal allowance allows the Chancellor to say he is spreading this limited largesse around.

The pension changes are unexpected and pleasingly radical. In the way he timed the reduction in the 50% rate of income tax, the Chancellor has shown an instinct for stimulating tax revenues at the right time – I suspect one of the effects of the pension reforms will be more spending by pensioners next year, as well as breathing new life into a way of saving that was losing favour in recent times. On balance, I think financial institutions will see this as positive and the saving (and voting) population will trust the current lot to ensure that tax favoured saving is still OK, even if interest rates have to stay low.

From a tax policy perspective there is little else of note and less targeted action to encourage youth employment than might have been possible as a counterweight to helping the aged.

I think the creeping administrative power of HMRC to raid bank accounts of tax defaulters and force ‘tax avoiders’ to pay up front to contest schemes is continuation of a trend that most UK tax payers will approve of or tolerate, but it will worry others – the aspect which is most troubling is the width of the discretion which the tax authority will have, but I disagree with those who expect human rights to be infringed."

Nick Cronkshaw, Simmons & Simmons

"The Government’s snappily titled document "Tackling aggressive tax planning in the global economy: UK priorities for the G20-OECD project for countering Base Erosion and Profit Shifting" sheds light on the Government’s current thinking and possible response to the final product of the 2014 and 2015 15 point OECD Action Plan to deal with various elements of base erosion and profit shifting. The Government’s stance, supporting multilateral action, is welcome and equally shows that the government is serious in its desire to modernise certain aspects of cross border taxation. Perhaps most notable is the Government’s stance on Action Point 1. The anticipated outcome is a tightening of the rules on what constitutes a permanent establishment and profit allocation under transfer pricing guidelines away from entities with little or no substance other than holding intellectual property rights. However, here the Government’s position is that if those changes fail to materialise in a way which is acceptable, it will consider adopting supplemental domestic rules to tackle these two issues independently."

Nikol Davies, Taylor Wessing LLP

A clearly politically motivated Budget, the 2014 announcement brought few surprises on the corporation tax front with the key measures relating to individuals and the continued attack on empty residential properties held in corporate envelopes.

Barring the usual introduction of targeted anti-avoidance rules, the Budget announcements relating to corporate taxes were broadly more positive including the commitment to reducing the corporate tax rate to 20% in April 2015, the increase in the Annual Investment Allowance to £500,000 until the end of 2015 and the increase in the R&D tax credit payable to loss making SMEs from 11% to 14.5% from April 2014.

The government also released its priorities for the OECD Base Erosion project, which provided interesting insights into the government's direction of travel in the area of international corporate tax reform. Whilst the government is putting almost £80m more funding into HMRC to enable them to delve into the tax arrangements of multinationals and endorses the BEPS project, it is trying to also provide some assurances to businesses that it is committed to a competitive corporate tax regime which includes generous reliefs for R&D and the patent box regime, believing that most activities currently qualifying for the UK Patent Box would meet any substance tests.

Other notable features include a confirmation that the government does not propose any significant changes to the CFC regime, it supports an international solution to hybrid mismatch arrangements which also ensure no double taxation and appears to favour a restriction on treaty benefits where the main purpose of an arrangement involves taking advantage of the treaty (rather than a limitation of benefits approach). In the area of interest reliefs, although endorsing the OECD's aim of identifying best practice, the inference is that no imminent changes are proposed to the UK's regime particularly given the government's reluctance to endorse structural interest relief restrictions (such as earnings stripping rules) to the high leverage financial and infrastructure sectors."

Liesl Fichardt, Clifford Chance LLP

Liesl Fichardt, Head of the Clifford Chance Tax Disputes Team expressed concern over the latest measures to accelerate payment of tax in circumstances where a taxpayer has used a scheme which falls to be disclosed under the DOTAS regime or which is subject to counteraction under the GAAR. This could affect approximately 33,000 individual taxpayers and 10,000 corporates. She said: "HMRC themselves expect a significant increase in litigation should they proceed to issue the proposed "notices to pay" and the notices are challenged. This will be at great cost to them and taxpayers, and will be incurred long before the substance of the tax dispute is considered and determined by a court."

Hartley Foster, Field Fisher Waterhouse LLP

O tempora o mores!

In 2005, HMRC announced (in somewhat Panglossian fashion) that tax avoidance would be ended by 2008. Budget 2014 implicitly confirms that this aim has yet to be achieved, and, indeed, probably never will be. Some nine years on, tackling avoidance remains a key theme for the Government; and yet further measures with the objective of curbing "tax avoidance" have been announced. It is to be noted that the introduction of the GAAR under Finance Act 2013 has yet to preclude the, at least, annual publication of screeds of targeted anti-avoidance legislation. A further weapon in HMRC's ever-burgeoning arsenal of measures available to be used against what it perceives to be egregious tax avoidance committed by a minority of taxpayers is to be introduced in Finance Act 2014: accelerated payment notices. These will require the tax said to arise in relation to avoidance structures to be paid before it is determined by the First-tier Tribunal whether or not there is a tax liability. The explicit basis of this policy is to preclude the taxpayer obtaining a cash flow advantage from entering into a tax avoidance structure, in respect of which it may take several years before its being considered by the First-tier Tribunal. As a corollary, the implicit basis is that it is the Treasury that should have the cash flow advantage: "this will ... secure tax revenues for the provision of public services." Chipping away at the somewhat glacial pace that tax disputes often have to progress at is, accordingly, unlikely to be a focus of the Government. It is expected by the government that accelerated payment notices relating to existing avoidance cases currently under dispute (which concern £7.2 billion of tax) will be issued to c.33,000 individual taxpayers and c.10,000 corporates primarily over the course of 2014/15 and 2015/16. There are two bases on which an accelerated payment notice will be able to be issued. The first is in relation to arrangements that have been notified under the DOTAS rules or have been the subject of a GAAR counteraction (a "DOTAS APN"). The second is where the "claimed tax effect [of the avoidance structure] has been defeated in other litigation" (a "CTE APN").

A CTE APN may be issued only if there has been a relevant final judicial ruling. A final judicial ruling is a decision of the Supreme Court or an un-appealed decision of any other court or tribunal. This is even though, first, a decision of the First-tier Tribunal is not binding precedent and, secondly, that a taxpayer has chosen not to continue with an appeal is not conclusive of that appeal not being meritorious per se. Given the anticipated numbers of APNs to be issued as against the comparatively much small number of Supreme Court decisions in relation to tax avoidance matters that have been released, it may well be that HMRC will be encouraged to adopt a wide interpretation of the precondition for a CTE APN: "the principles laid down … would, if applied to the applied arrangements, deny the asserted advantage". The risk is that arrangements that might have, at best, only a superficial similarity to the principles laid down in a decided case will be considered sufficient. Indeed, in many instances, it is motive, rather than, say, the contractual terms, that has been determinative.

There is no route to appeal against the issue of APNs to the First-tier Tribunal. Recipients of an APN will have to either appeal the penalty or issue judicial review proceedings to challenge the APN. The government expects that "a range of different legal challenges, including judicial review proceedings, an increase in closure notice applications … and disputed enforcement activity" will ensue.

Each of the measures has a degree of retrospectivity – "judicial rulings" includes decisions released before the enactment of Finance Act 2014. It is intended that CTE APNs can be issued consequent on pre-Finance Act 2014 decisions, but may not be issued later than two years after enactment of Finance Act 2014 or one year from the day the return was submitted or appeal made. It may be that DOTAS APNs will be able to be issued in relation to arrangements that have been notified prior to the enactment of Finance Act 2014.

That the fons et origo of the DOTAS rules was to provide HMRC with information about tax structures in advance of their receipt of tax returns seems to have been forgotten in the tax avoidance maelstrom. An arrangement being notified under the DOTAS rules was not an egregiousness signifier. Previously, it had not been uncommon for advisers to recommend that a notification should be made in circumstances where there was uncertainty as to the application of the rules. That may not be the optimal approach post Finance Act 2014. The numbers of DOTAS notifications has been falling year on year (from 587 in 2004/05 to 77 in 2012); that fall may be accelerated consequent on the introduction of DOTAS APNs.

Caspar Fox, Reed Smith LLP

For me, the biggest story of the Budget is the extension of the measure for accelerating tax payments to schemes that fall within DOTAS. This will incentivise HMRC to open enquiries and issue pay notices promptly, and if that is how HMRC act in practice then it should be effective in reducing the use of schemes needing to be disclosed under DOTAS. However, in my view this policy offends the principle of people being presumed innocent until found guilty. Whereas, for schemes that are counteracted under the GAAR, at least the GAAR Panel must decide that there is a case to answer before the tax has to be paid.

It is a great pity that the government did not follow the House of Lords' recommendation and postpone the introduction of the salaried member rules. Even if they had ruled out an overhaul of the legislation, a postponement would at least have allowed the legislation to catch up with the latest HMRC guidance.

I am surprised that the use of corporates to hold lower-value residential properties is sufficiently widespread to justify the government's estimated tax revenues of nearly £90 million each year from lowering the SDLT and ATED thresholds. They wildly undershot on the estimated tax take from introducing the ATED, however, and clearly think that they have spied a lucrative (and politically acceptable) opportunity.

Philip Gershuny, Hogan Lovells International LLP

It is disappointing that calls for deferral of the new salaried members rules have fallen on deaf ears. Especially as with only a little over 2 weeks until the new rules take effect we are still expecting further amended draft legislation and another round of revised guidance. Given that the revised legislation was only published on March 7 there has been little time for feedback. It really doesn't give partnerships much opportunity to properly deal with what are significant changes.

Charles Goddard, Rosetta Tax LLP

The headlines say that the real story was all about savings, and that it was a quiet Budget for business. The increase in the Annual Investment Allowance is welcome, though not as large as was hoped for; there are welcome developments for a range of industry sectors, notably whisky producers, pubs, PAIFs and the oil and gas sector. And nobody will complain about a steady-as-she-goes setting, surely?

And yet, this "pro-business" Budget is not what it seems. Some of its measures are decidedly anti-business, which make the UK a much less attractive place to invest. We are indeed Through the Looking Glass, in a world where we must believe at least 6 impossible things before Breakfast:

1. A supposedly pro-Business, Tory Chancellor announces a Budget, the most significant measure in which causes a major sector of British business to lose more than 5% of its value in the hours following his announcements - without even any warning that this might be on the agenda.

2. The package of measures announced includes one which prevents any transfer of profits by any means whatever between group companies to obtain a corporation tax advantage - with no guidance about how far this extends.

3. Residential real estate letting businesses and property traders are faced with an almost 4-fold immediate jump in SDLT on purchases, from 4% to 15%, unless they qualify for complex reliefs which may affect the day-to-day running of their businesses - and they are given less than 12 hours to work out how these rules apply.

4. Rules changing the tax treatment of some members of LLPs are to come in on 6 April despite warnings of chaos in the sectors affected and requests from many sources, including the House of Lords Economic Affairs Committee, to delay their introduction.

5. The government publishes details of all banks which have signed up to the Banking Code of Conduct and threatens those who have yet to do so with being named and shamed next year - the most egregious example of playground bully behaviour bar one ...

6. Which is of course the requirement that any user of a disclosed tax avoidance structure must pay the tax up-front, so that the taxman can use it to fund litigation to make sure it doesn't work. Surely a case of jam tomorrow or jam yesterday - but never jam today.

I tried it this morning but failed. Curiouser and curiouser!

Judith Greaves, Pinsent Masons LLP

The changes to approved plan limits and the move to self-certification and on-line filing have been well trailed – although, frustratingly, the final form of the legislation is not yet available for companies to consider in advance of 6 April, when the changes will have effect. Opportunities to transfer shares into an ISA following share plan maturities may be more attractive once the increased ISA limit takes effect..

What was not expected is the change of plan on share plan awards to internationally mobile employees – now delayed until April 2015 but due to apply from then to preexisting, as well as new, awards. Inevitably, there will be complexity around the transition.

The Budget policy costings anticipate an increased tax yield due to the inclusion of preexisting awards, as well as a "small behavioural adjustment" – in other words, companies and employees will be thinking carefully about the timings of vestings and exercises.

Ashley Greenbank, Macfarlanes LLP

"On the back of its anti-avoidance agenda, the government is providing HMRC with a raft of wide-ranging additional information and compliance powers. There will not be much protest about the introduction of the high risk promoter regime but the new follower penalties and accelerated payment rules will catch a much broader group of tax payers. On the latter, the government has confirmed that it is going to extend accelerated payment beyond follower cases to cases where HMRC is taking counteraction measures under the GAAR and the GAAR Panel have given an opinion that the transactions was not a reasonable course of action or for cases involving schemes which fall within the DOTAS regime.

The proposal to extend accelerated payment to cases within the DOTAS regime sends some mixed messages. The original purpose of the DOTAS rules was to provide HMRC with an early warning system for tax schemes and planning ideas that were in the market. The descriptions of disclosable schemes could be more widely drawn than was necessary to combat aggressive avoidance given that there was no penalty for having entered into a scheme within the DOTAS rules (other than perhaps some increased scrutiny) provided that promoters and taxpayers complied with the disclosure requirements. The fact that a scheme was within the DOTAS rules was not necessarily an indicator of its being regarded as particularly colourable and, in cases of doubt about the scope of the DOTAS rules, taxpayers could make a "protective" disclosure. The DOTAS rules have over time developed to address other issues, but the basic principle is changed markedly by this proposal. Taxpayers will have to think more carefully before making a disclosure and the process of reforming the DOTAS hallmarks (also confirmed in the Budget) will have to reflect this change in the underlying rationale."

Elaine Gwilt, Addleshaw Goddard LLP

"There was the predictable creep of existing anti-avoidance provisions (although perhaps less than we have become used to), together with the controversial premature tax collection for arrangements HMRC find naughty. The mainstream business tax announcements tinkered around the edges with little to create tangible stimulus. Calls to scrap, or at least postpone, the employment tax changes for LLP members fell on deaf ears. For business, having "no surprises Budgets" is to be applauded, although it does take the bang out of Budget day for practitioners."

Kate Habershon, Morgan Lewis & Bockius

"There did not appear to be any business tax cards up the chancellor’s sleeve this time – something of a disappointment for the more optimistic who were hoping for a deferral of the introduction of the changes to the rules for members of LLPs. As further (unspecified but "minor") changes in those rules are expected in the Finance Bill, this will leave firms with a mere 9 days to get their house in order. HM Treasury’s position paper on BEPS is interesting. Although they are adopting a holier than thou approach to some aspects (such as the CFC rules where "it is not anticipated that ... further substantive change" is required), the government appears committed to helping find workable solutions to the failure of international tax concepts to adapt to modern business methodologies. The observation that the digital economy does not warrant a separate set of rules, but rather that the permanent establishment and transfer pricing rules should be updated to reflect true value creation, seems eminently sensible, if somewhat hard to achieve in practice."

David Harkness, Clifford Chance LLP

"The government had one bite of the cherry last year with an anti-avoidance measure to block schemes using total return swaps to shift profits from a UK company to an affiliate in a tax haven. The new transfer of corporate profits measure is a second bite using extremely wide ranging legislation which could apply to: interest payments, royalties and payments of deferred consideration in securitisations. While there is a purpose test in the provision, this measure will cause significant concern to taxpayers in relation to ordinary commercial transactions."

Philip Harle, Hogan Lovells International LLP

"When the Chancellor advertised the Budget as being for the makers, the doers and the savers, I briefly held out hope that he might take bank and building society accounts out of tax altogether (as recommended in the Mirrlees Review in 2010) or at least limit tax on interest to the excess over inflation. Sadly not, and the Budget could perhaps be better described as "tilting the playing field" (to use the Chancellor's bizarre metaphor) towards financial advisers, whose fees will surely be swelled as a result of the higher ISA limits and increased attractiveness of pensions.

It is disappointing but not surprising to see another ridiculously widely drafted anti-avoidance rule. The rule relating to transfers of corporate profits that should be known as the "I can't believe it's not a total return swap" rule is drafted so widely that it catches not just arrangements which aim to circumvent section 695A of the CTA 2009 but probably any form of transfer pricing, profit shifting or base erosion an international group might care to indulge in. This rule is now in force which makes it rather difficult to advise on anything and it seems too late for it to be improved before publication of the Finance Bill next week. In the interests of the rule of law I hope it will get polished during the Bill's passage..."

Louise Higginbottom, Norton Rose Fulbright LLP

"General

In general terms, Budget 2014 was (in a welcome change) light on significant reforms for the corporate sector, but generated genuine excitement in terms of the pensions changes. For multi-nationals, the UK Government’s response to the BEPS initiative will be of most interest in the longer term. Interestingly, a couple of the specific Budget proposals seem to pre-empt the outcome of BEPS. These are the setting of a statutory cap on rental deductions paid to associated companies for the bareboat charter of drilling rigs and accommodation platforms in the UKCS (HMRC considering that current transfer pricing rules do not give a sufficient share of the tax take to the UK), and the new rules countering profit shifting between members of corporate groups. On the face of it, the financial sector escapes largely unscathed, although banks have to face more tinkering with bank levy. They will also be waiting with interest to see how HMRC seek to use their new "name and shame" powers in relation to the Banking Code of Conduct. However, the impact of the pension scheme changes on insurance companies over the longer term will no doubt have a much greater impact than any tax change would have.

UK oil and gas

For the UK oil and gas industry, as ever the changes are a mixed bag, with new reliefs for certain high pressure fields and an undertaking to adopt the Woods report proposal for a wholesale review of the UK oil and gas tax regime being counter-balanced by the likely increased cost as a result of the restriction on rental deductions for the bareboat hire of drilling rigs and accommodation platforms."

Michael Hunter, Addleshaw Goddard LLP

"It was a relatively boring Budget but that's no bad thing in my view. The Chancellor deserves credit for not threatening progress on reducing the deficit by bribing the electorate with tax cuts. Extending and doubling the annual allowance will be particularly pleasing to SMEs with the CAPEX to use it. One of the more worrying developments was the extension of the 15% SDLT rate and ATED to relatively low value residential properties (£500k upwards). It looked like blatant revenue raising rather than anti-avoidance. Will the next step be to attack commercial property acquired via corporate SPVs?"

Ben Jones, Eversheds LLP

"While less exciting for tax practitioners, the lack of big surprises or significant changes to business taxation in the Budget should in itself be applauded. Key requirements of a business-friendly tax system are stability and certainty, and this Budget has not thrown any curve-balls for business. However, another key requirement for a business-friendly tax system - simplicity - continues to be a concern. Behind the headlines, the Budget contains further details on a significant number of changes that continue to increase the complexity of the UK tax system and require business to devote resource to understanding and addressing the changes, for example, the proposed changes to the taxation of corporate debt and derivatives and changes to the taxation of partnerships. Complexity has long been an issue with the UK tax code and despite stated intentions to address this, this problem looks set to continue.

Another growing shadow for business, particularly international business, is the on-going OECD BEPS project. The government expresses broad support for this project in the Budget and an associated briefing paper, and this is an area that business needs to pay particular attention to. The OECD paper released last week detailing the proposals to address "treaty shopping" is a worrying example of the extensive changes proposed to the international tax system that could have a wide impact on international business structures."

Erika Jupe, Osborne Clarke

"HMRC have made a rod for their own back by not delaying the LLP salaried member rules until April 2015 (as suggested by the House of Lords Committee). They will be inundated with requests for clearances given the significance for the taxpayer of getting it wrong and the heavy reliance on HMRC guidance to interpret the legislation. Perhaps HMRC can second some of their new recruits who have been appointed to tackle non-compliance to deal with these applications!"

Geoffrey Kay, Baker & McKenzie LLP

"The OECD has recently started to publish discussion draft documents on a few of the individual actions in the OECD's BEPS action plan, but it will be some time yet before the OECD's thinking on other actions will become known. The government's policy paper on BEPS, published on Budget Day, provides an interesting insight into some of the government's own thinking on the individual actions contained in the BEPS action plan. To take two examples, the government confirmed, in relation to the digital economy, its view that any new rules should be consistent as between those companies which are primarily digital companies and those for whom digital technologies form part only of the business model. And in the context of permanent establishments, the government raises the question whether some of the traditional 'preparatory and auxiliary' activities which currently do not give rise to a permanent establishment should be reconsidered."

Colin Kendon, Bird & Bird LLP

"The really good news is that shares for rights is not going to be scrapped or modified as rumoured. This will allow private companies (and even some listed companies) to continue to offer employees free shares on a discretionary basis which benefit from tax free gains in exchange for the surrender of certain employment rights.

The announcement the government will consult on the recommendation of the OTS for a tax-advantaged employee shareholding vehicle is also very welcome. What is needed is a vehicle which allows shares to be warehoused pending distribution to employees through genuine share plans with none of the existing tax disadvantages of ESOPs. There will be a market for administrators to run these vehicles so off-shore trustee providers should not, in my view, find it necessary to lobby against these proposals."

Mike Lane, Slaughter and May

"For the corporation tax adviser, whilst Budget day is not quite as unpredictable as it used to be before proposed changes and draft legislation were produced for consultation months in advance, there were still a couple of surprises. Chief amongst them is the fact that the tax avoidance scheming industry is not (yet) dead. Instead it has been so busy finding ways around the anti-avoidance legislation announced in December, 2013 to counter profit-stripping using derivative contracts that we are now faced with a much wider rule seeking to counter avoidance schemes involving the transfer of corporate profits. As ever when HMRC has a purpose test to hide behind, the proposed drafting is far too wide and uncertain in scope as evidenced by the need in the accompanying technical note to explain why common commercial transactions such as securitisations, reinsurance and hedging arrangements should (but might not) be okay. And it appears that reviewing the bank levy has replaced painting the Forth bridge as the job that never ends. With the product of last year's review yet to be enacted in this year's Finance Bill, another review is set to be launched on 27 March, this time looking at moving to a system of banded rates."

Daniel Lewin, Kaye Scholer LLP

"Notwithstanding the unanimous objection by the Alternative Investment Management Association, the City of London Law Society, the British Private Equity & Venture Capital Association, just about any UK based law firm and indeed the House of Lords as regards the timing of the introduction of the new proposed and highly complex LLP and partnership tax rules, HMRC have ignored all calls for deferred implementation and gone ahead with the highly controversial (and partially half-baked) legislative changes, which will now come into force on 6 April. An oft-made justification for resisting deferral was that "the revenue has already been booked", but it seems more than a challenge as to how even for a revenue raiser (which the anti-avoidance measures have become), anyone could sensibly predict the amount of money the measures will raise – given how uncertain the legislation and guidance is, and therefore the tax impact. Legal and tax advisory costs will certainly go up, but any marginal benefits to law and accounting firms are clearly outweighed by the damage to the predictability and reliability of the UK partnership tax regime. "Legislating by example", as the measures partially do, cannot be the right way for a legal regime as sophisticated as the UK’s.

Andrew Loan, Macfarlanes

"The Budget included the unexpected announcement of a fundamental recasting of the tax regime for defined contribution pensions schemes. From April 2015, it is proposed that taxpayers will be allowed almost complete flexibility to access their pension savings without buying an annuity, subject only to paying tax at their marginal income tax rate. As these changes work through, they could have far-reaching effects on the structure of the pensions industry and the economy more widely: for example, employees may be tempted away from defined benefit schemes (where they are still available) by the flexibility of defined contribution pensions. If the security of retirement income provided by buying an annuity becomes even less attractive, pension funds and other annuity providers may not need to invest to such a significant extent in fixed income products such as gilts and corporate bonds.

Alongside the Budget, the Treasury published a document setting out its approach to transfer pricing and related parts of the OECD’s base erosion and profit shifting (BEPS) initiative. Helpfully, the paper acknowledges the potential compliance cost for business needs to be balanced against the desire for governments and tax authorities to receive more information through country by country reporting, and suggests that huge amounts of new information should not be required beyond what is already usually prepared. It is to be hoped that changes to the tax compliance regime in the UK as a result of the BEPS initiative will not become a greater impediment to the UK's international competitiveness."

David Milne QC, Pump Court Tax Chambers

"By far the most controversial measure is what HMRC are calling the "Budget 2014 DOTAS measure", a provision which if enacted would enable HMRC to issue a "Notice to Pay" requiring accelerated payment of tax to any user of a scheme which has at any time in the past been disclosed to HMRC under the DOTAS rules. This is expected by HMRC to involve issuing notices to some 33,000 individual higher-rate taxpayers demanding accelerated payment of £5.1 billion of tax in dispute.

Many tax advisers (and most taxpayers!) would support the "Autumn Statement 2013 Follower measure", confirmed in the Budget, which simply seeks to prevent users of failed tax-avoidance schemes - ie schemes which had already failed in the Courts - from delaying payment on technical grounds, although even that measure apparently gives HMRC power to decide for itself whether a scheme used is "essentially similar" to one which has failed in the Courts, and many will no doubt be uneasy about how that power will be used in practice.

But such unease pales into insignificance when compared with this sister DOTAS provision, because, amongst other things, in practice very many arrangements have been disclosed under DOTAS out of abundance of caution and a desire to be transparent. Now, many years later, but potentially years before the arrangements are to be tested in Court, the users are to be penalised for their caution and transparency.

It is this retrospective element which is so unacceptable: if the new law were to say that "from today" anyone using a DOTAS-notified scheme must pay up front, no-one could reasonably complain. As it is, HMRC themselves say (at page A100 of their Overview): "These measures are expected to prompt a range of different legal challenges including judicial review proceedings, an increase in closure applications to the Tribunal and disputed enforcement activity."

You bet - watch this space!

[In relation to pensions,] what the Chancellor was hoping for, and has achieved, is to get the media concentrating on the pension changes so as to secure the grey vote. But in fact, the abolition of the obligation to purchase an annuity at 75 is not quite the radical change, or indeed, the surprise it’s been made out to be. At least, my SIPP adviser’s been predicting it since 2011, when the minimum income requirement of £20,000 was introduced (that is, the rule that you could draw down as much of your pension pot as you liked- subject to paying tax at up to 55% on it- provided you could show guaranteed income of £20,000 pa). That minimum income requirement is being reduced to £12,000 pa from next week, before, it is proposed, being abolished altogether next year (with the maximum rate payable on the drawdown being reduced to 45%).

Of course, what happens when you’ve spent your entire pension pot and are reduced to living on the State pension is another matter. That may be when the Bill which Lord Falconer is introducing into the House of Lords (on assisted dying) gets amended to become part of government policy!"

Graeme Nuttall, Partner, Tax and structuring group, Field Fisher Waterhouse LLP and author of the Nuttall Review of Employee Ownership

"This is, hopefully, the dawning of a new era. Budget 2014 confirmed the previously announced important new tax exemptions for employee ownership trusts ("EOTs") will be enacted in the Finance Bill 2014. These exemptions have wide-ranging potential to create a fairer choice between direct and indirect employee ownership business models:

There will be no need to compromise the principle of employee trust ownership to provide tax free bonuses to staff. Instead of the complexities of having to establish a share incentive plan ("SIP"), a company controlled by an EOT will be able, instead, to pay income tax free cash bonuses, on same terms, to all employees. The same individual limit as now applies for SIP free share awards, £3,600 per tax year, applies to these bonus payments. The income tax exemption provides a tax effective reward to employees for working in a company that adopts the trust or indirect model of employee ownership.
The new capital gains tax ("CGT") exemption will provide an alternative solution for owners with a succession problem: a sale to an EOT. Why sell to, say, a few managers in a management buy-out and pay 10% CGT (after entrepreneur's relief) when there is a complete CGT exemption for an all-employee buy-out?
The many owners currently planning to introduce indirect employee ownership will have an additional way to help finance that move; through the tax savings in the new income tax and CGT exemptions.

But the employee ownership sector has to wait until 27 March 2014, for the publication of the Finance Bill to see what changes have been made during the consultation process. The original specification of an EOT needed changes to it. There were encouraging signs, from HM Revenue & Customs and HM Treasury, during the consultation process that some additional flexibility would be added to make the EOT a more viable option. Let's see what gets announced on 27 March 2014.

Budget 2014 confirmed that the government will also consult on the Office of Tax Simplification ("OTS") proposal to introduce an employee shareholding vehicle. As previously acknowledged by the OTS, the need to facilitate sales by employees of relatively modest quantities of shares that they have acquired via a share plan, and the need, identified in the Nuttall Review of Employee Ownership, to hold a large static shareholding "should be considered together, in order to have a consistent approach to a common theme, and to avoid complexity and contradiction in any resulting legislation".

Mathew Oliver, Bird & Bird LLP

"The enhanced SME R&D reliefs will be a welcome boost for many of our clients. Additionally making Seed EIS relief permanent is great for start-ups. Otherwise, with the main beneficiaries being OAPs the most interesting thing for me is the Governments paper on BEPs."

Darren Oswick, Simmons & Simmons LLP

"In Autumn Statement 2013, the government announced it would be targeting the use of dual employment contracts by UK resident but non-domiciled individuals who claim the remittance basis. The proposed measures target individuals who enter into separate but related employment contracts for UK and non-UK employments with the same or associated employers. Following the publication in January 2014 of draft legislation for consultation, the government announced in the Budget that it will be making a number of changes to these draft provisions to limit the impact on arrangements not set up for tax avoidance purposes. The most welcome news is that it appears that the new rules will not apply to income relating to duties performed in tax years prior to 06 April 2014. As a result, it may be the case that deferred compensation awarded on or before but vesting after 05 April 2014 will escape the new rules. In addition, some dual contract structures are required (or at least advantageous) from a legal / regulatory perspective – the intention is to exclude certain arrangements falling into this category. An additional (and welcome) change will be made to the threshold condition which is satisfied where the rate of tax payable in the non-UK jurisdiction is less than 75 per cent of the UK’s additional rate of income tax – this will be reduced to 65 per cent. As the UK additional rate is currently 45 per cent, in real terms this means the tax rate in the overseas jurisdiction must be less than 29.25 per cent for the condition to be satisfied (rather than 33.75 per cent) – which potentially takes countries such as Switzerland outside the scope of the rules, depending on the level of earnings."

David Pett, Pett, Franklin & Co LLP

"As the many proposed changes to the tax treatment of employee shares have already been published, the lack of fresh announcements was hardly surprising. There is to be a technical change to the calculation of the 10-yearly charge for non-section 86 discretionary employees trusts, and changes to the treatment of awards to internationally mobile employees (as recommended by the OTS) are to be postponed to April 2015, but then applied to all outstanding awards and shares held by such employees, whenever acquired. All other proposed changes were re-confirmed, and we await revised draft legislation.

One change sought, but not mentioned, is an extension of the exemption, from any ‘dividend tax charge’, on a sale-back to the issuing company of employment-related securities within 5 years of acquisition. The exemption from this ‘tax trap’ afforded by s385A ITTOIA 2005 presently extends only to ‘employee shareholder shares’ repurchased after the employee has left the company. If it were extended to all employment-related securities, this would allow SMEs to buy-back employee shares (for cancellation or into treasury) without the need to do so through an offshore employees’ trust – a small technical change which could produce a substantial simplification and cost-saving for SMEs."

David Pickstone, PwC Legal

"Recent Budgets have seen HMRC ratchet up the pressure on avoidance. In the last Budget, HMRC announced a measure which allows them to issue ‘failure notices’ to taxpayers whose cases are stood behind other similar cases, sometimes delaying payment for many years. The notices require the recipient to amend their tax return in line with court decisions in similar cases or face an additional tax geared penalty. HMRC could also issue a "notice to pay" in these circumstances, requiring payment of the disputed tax within 90 days.

The 2014 Budget announcement confirms an expansion of these powers. HMRC will soon be able to issue a "notice to pay" to any taxpayers who have used a DOTAS scheme or an arrangement which HMRC counteracts using the new GAAR (in addition to the "follower circumstances" covered above). These payment notices would be available to HMRC as soon as they open an enquiry; something that doesn’t sit very well with the self-assessment rules, which require tax to be formally assessed before it falls due and payable. HMRC clearly see this as a big issue – they estimate that they will issue 33,000 notices in existing avoidance cases concerning £5.1 bn in tax."

Andrew Prowse, Field Fisher Waterhouse LLP

"It was commended to the House as a Budget for "the makers, the doers, and the savers", although perhaps the savers did best this time around as recompense for having involuntarily put up with desperately low interest rates on their savings for years (or to get their votes…). Pensioner bonds, to redress the imbalance of the effect of interest rates for savers versus borrowers, and intended to pay an above market interest return are likely to prove popular. However, much more fundamental are the changes to the structure of pensions, intended to offer greater flexibility to investors. A huge change will be the removal of the requirement to buy an annuity, expected to take effect from April 2015. The billions wiped off the share value of UK insurance industry a few minutes after the Chancellor made the announcement, and before he had finished his speech, indicated the significance of this proposal. For those still some way off retirement, the benefits of the new regime are likely to be moved further off, as a result of consultation for the normal minimum retirement age to be moved from 55 to 57 from 2028. It will be interesting to see whether in the future the Chancellor will play around with tax relief on pension contributions as the price for greater flexibility on drawdown. In the meantime, in addition to making pension contributions, savers will be able to invest more, more flexibly, in nicer ISAs.

For businesses (the makers and the doers), it was generally a quieter affair. For the owner-managed sector, it was a case as steady as she goes. Despite some rumours, the reduction in the main rate of corporation tax to 20% from April 2015 was not brought forward a year, the main rate from April this year being fixed at 21%. However, there was good news in the form of the doubling of the annual investment allowance to £500,000 from 1 April 2014 to 31 December 2015. Given that the AIA will plummet back to £25,000 from 2016, the Chancellor clearly hopes his measure will spark a rush of investment (more making and doing, and less saving). He is probably right.

Those who invest in the makers and doers will be pleased to see that the Seed Enterprise Investment Scheme (SEIS) and the associated capital gains tax reinvestment relief will be made permanent (it was originally only a temporary measure). For EIS and SEIS, the government announced that it will consult on the need to accommodate the use of convertible loans. This is encouraging. At present, shares issued on the conversion of convertible loans do not without additional structuring qualify for EIS or SEIS status, whereas, conceptually, the investor is on conversion taking risk in the company in a way commercially comparable to straightforward EIS-eligible investors.

In addition, the government is concerned about the use of what it calls contrived structures to allow EIS investment in low-risk activities benefitting from income protection through government subsidies. We can expect venture capital tax relief for these structures to be stopped. EIS and SEIS are aimed at giving investors a tax break to encourage investment in riskier enterprises and so it is no surprise that the government is targeting structures where the risk may not warrant the relief. It will be interesting to see the detail of what the government has in mind and how it will take effect.

Whilst it was 'steady as she goes' for most, those involved in perceived tax avoidance faced choppier waters. There were the usual specific measures and tweaks to DOTAS. Advance payment notices will enable the government to get its hands on disputed tax up-front in a move that (like the new follower penalties) seems a little incongruous with the Chancellor's support in his speech of the Magna Carta. One wonders whether the cash-flow advantage from APNs will make the speed of progress of tax cases even more like sailing into the wind than now and, to overdo the metaphor, whether HMRC will seek to pick off the weaker ships first so that it can issue APNs to the whole fleet."

Leo Ringer, CBI

"Businesses throughout the UK will be encouraged by a Budget which will put wind in the sails of business investment, especially for manufacturers. Ahead of the Chancellor standing up, the CBI had argued that this was a make or break Budget, coming at a critical time in the recovery. In focusing on business investment, exports and saving, the Chancellor has focused his firepower on areas that have the potential to lock in growth.

The energy costs facing British businesses are a major headwind and this Budget sees a much-needed package to help keep manufacturing jobs in the UK, while underpinning vital investment in new energy. The CBI has also argued that the tax system could do more to unlock new business investment, and the doubling of the Annual Investment Allowance will be a shot in the arm for businesses ready to invest and drive the recovery. A range of other measures on export finance, infrastructure, housing and small business finance will support a vital rebalancing of the economy towards investment and export-led growth.

The fiscal reality is as clear as ever, so it’s important that this balanced Budget has reaffirmed the government’s commitment to deficit reduction."

Charlotte Sallabank, Jones Day

"Key points of interest for business in my mind are three of the new anti avoidance provisions. In particular, the new section 1305A: Avoidance schemes involving the transfer of corporate profits. Whilst this is principally aimed at countering schemes introduced to circumvent the total return swaps anti-avoidance legislation, it has a far wider potential reach and could be applied to arrangements to utilise carry forward losses by shifting income around the group if that income is akin to profit. Similarly it could apply where a business is hived into another group company and some form of tax relief is available in that company. It will also be interesting to see how the BEPS proposals interact with this legislation.

Two other significant pieces of anti-avoidance legislation for business are the 'amendment of returns to take account of relevant judicial rulings' and accelerated payments of tax in follower cases'; and 'accelerated payment of tax associated with schemes covered by the DOTAS rules or counteracted under the GAAR'. Whilst both of these pieces of legislation are targeted primarily at widely marketed schemes there is scope for them to have application in more straightforward commercial situations, for example where a cross border leasing arrangement has been entered into which falls under DOTAS; or if a company has entered into tax planning arrangements which are being disputed by HMRC and another case has been decided which in HMRC's opinion is relevant then HMRC can issue a Follower Notice requiring the taxpayer to take all reasonable steps to agree the case with HMRC, potentially pressurising taxpayers not to resolve their disputes through the court process."

Angela Savin, Norton Rose Fulbright LLP

"The focus on tax avoidance in Budget 2014 is on "collect now, contest later". Following a short consultation, the government has gone ahead with plans to accelerate the time at which tax must be paid, where the taxpayer has engaged in tax avoidance. The measures apply to matters which have not been settled by Royal Assent of Finance Bill 2014 (and so may be considered retrospective). These measures will fundamentally shift the economics of tax avoidance, and for most taxpayers in this situation, as they will be required to pay tax before the end of 2014, they will need to focus urgently on whether they are content to pay, or whether to litigate to try and reclaim the paid tax from HMRC."

Tom Scott, McDermott, Will & Emery UK LLP

The proposals on avoidance schemes involving the transfer of corporate profits show how the legislative process has lost its way. A clearly abusive scheme which you would have thought was attackable under the GAAR or other existing rules gets its own broadbrush antibiotic, with even the HMRC Guidance Note admitting " in practice it is likely that any challenges would be run in parallel". And because the antibiotic impacts a range of less offensive transactions, we need a set of Examples outside the legislation showing what’s in and what’s out.

For multinational groups, the most interesting announcement is not a legislative proposal but the paper setting out the UK’s position on each of the 15 areas which the OECD has committed to report on as part of the BEPS initiative. This is to be applauded; it would be helpful if other countries followed suit. While one has to do an awful lot of reading between the lines on some issues, it is helpful, for instance, to know that the UK plans no major changes to the recently overhauled CFC rules, and indeed sees CFC regimes as a matter for each country to determine. It also seems that in terms of the Model Treaty proposals which emerged last week, the UK ( sensibly) favours anti-avoidance restrictions rather than the US-style Limitation of Benefits restriction. Not surprisingly, as a net exporter the UK ( like the US) is lukewarm on radical changes to the permanent establishment definitions, because it stands to lose more than it gains. And if it isn’t reading too much into the runes, the way may be paved for an " interest stripping" type restriction in due course, with carve-outs for the infrastructure and financial services sectors.

The most significant announcement undoubtedly relates to the proof that inflation is alive and well; a threepenny bit will now be worth a pound. For those prone to nostalgia, a note of caution. I recall that in the year the threepenny bit was last in circulation, while the charts were topped by Rod Stewart’s Maggie May, they were also topped for rather longer by Ernie by Benny Hill."

Martin Shah, Simmons & Simmons LLP

"The long running saga of reforming the UK taxation of corporate debt and derivatives continues, although the final destination is not yet in sight. The Budget announcements confirm changes to the degrouping rules for corporate debt and derivatives, but what about the rest of the reform package, following the consultation and extended working group process? Budget 2014 does trail further measures, enhancing anti-avoidance aspects of the "deemed creditor loan relationship" rules that apply to UK corporate investors in certain collective investment vehicles and, of potentially more interest to the innocent, "clarification" of aspects of the operation of these rules, which it is hoped will assist real world funds and their investors. A Technical Note is to be issued shortly setting out proposed changes, including more detail on the measures outlined above, to make the rules simpler, more certain and more robust against avoidance. It is, however, interesting to note the Government’s confirmation that the partnerships related aspects of these reforms have been pushed back to 2015 – perhaps a bridge too far when partnerships have enough to think about at the current time. On that latter topic, it is disappointing to see that despite much adverse comment, including the strong recommendation by the House of Lords Finance Bill sub-committee to delay the salaried member aspects of the partnerships tax review to enable a more measured transition, the government has confirmed that the full package of measures will take effect from April 2014. Even though less than 3 weeks away, however, it is clear that further changes, as yet undetailed, are to be made to the December draft legislation – this is far from the stable and certain tax system to which the UK aspires."

Mark Sheiham, Simmons & Simmons LLP

"The government seems keen to (or at least be seen to) keep up its fiscal pressure on banks, with further changes to the bank levy and the enhanced banking Code of Practice receiving very high take-up from the banking sector. However, there seems to be increasing tension between the bank levy’s twin policy objectives. It appears to be succeeding in supporting the Government’s objective of encouraging banks to reduce the size of their balance sheets as part of a wider de-risking of the banking sector – but that in turn causes revenue generated to fall short of its £2.5 billion per annum revenue raising target, despite repeated rate increases. The frequent references to using bank levy increases to offset the banking sector’s benefit from corporation tax rate reductions lead to an element of confusion over whether the revenue target remains £2.5 billion per annum or is in fact now higher than this. The proposed redesign of the bank levy into a "banding model" with charge levels fixed within each band is presumably intended to make the revenue from the bank levy more constant by preventing most modest reductions in balance sheet size impacting on revenue. But it would also reduce the incentive for banks to de-risk, and create distortions around the borders between the bands. And the Government’s perception of "concerns raised around the existing bank levy" to be addressed by the redesign remain as yet unexplained."

Rupert Shiers, Hogan Lovells International LLP

DOTAS continues to develop substantive effect.

"The Disclosure of Tax Avoidance Schemes regime (DOTAS) was introduced in 2004 "to provide the Inland Revenue with information about potential tax avoidance schemes". The proposals in TIIN A93 provide for reversal of a key element of the self-assessment regime where planning falls within DOTAS. Under these proposals, HMRC can require a corporate or individual to pay tax as if the planning was ineffective, subject only to a refund if HMRC ultimately concede it to work.

The difficulty is that DOTAS covers much wider ground than "tax avoidance schemes". The widening of DOTAS was inoffensive when it was merely an information regime. Under the current proposals, its mere application can stop tax collection from being based on the current self-assessment. The application of DOTAS can already prejudice a corporate's ability to bid for public sector contracts (under the so-called procurement guidelines). This places increasing weight on the DOTAS analysis at the time of any planning, as well as encouraging taxpayers to look hard for reasons why DOTAS does not apply, and to structure around it. This is obviously counterproductive.

The new proposal forms part of a package of measures to discourage tax avoidance. It was first proposed by HMRC in a consultation document (Tackling Marketed Tax Avoidance) on January 24. HMRC say that it is now to be enacted "following consultation" despite very negative responses to the proposal by (eg) the CIoT in the consultation. It might be better to say that it will be enacted "despite consultation".

Nick Skerrett, Simmons & Simmons LLP

"Budget 2013 announced measures to enable HMRC to issue a notice to the user of a tax avoidance scheme that they should settle their dispute with HMRC, when that tax avoidance scheme had been defeated in other litigation. At the Autumn Statement, the government announced that accelerated payment notices, requiring payment of the tax in dispute prior to the litigation concluding, could be issued to taxpayers that did not settle their disputes with HMRC in response to the notice. Budget 2014 announces an extension to the accelerated payment provision to enable HMRC to issue a ‘Notice to Pay’ to persons using arrangements that fall to be disclosed under the DOTAS rules or which HMRC counteracts under the general anti-abuse rule. The government expects this to yield £2.1bn in accelerated payments of tax. Critics have accused the measure of undermining the rule of law by allowing HMRC to insist on the payment of taxes where the taxpayer’s position might be legally sound, but the Chancellor has stressed that taxpayers who succeed in litigation will be able to reclaim the tax together with interest. That of course assumes the taxpayer is adequately solvent to pay the demand."

Nicholas Stretch, CMS Cameron McKenna LLP

"The Budget itself had only one (welcome) surprise for share schemes, which is that proposed share scheme tax and NIC changes for expatriate employees (both inbound and outbound) will now take effect from April 2015 rather than September 2014 as previously proposed.

However, the absence of fresh material in the Budget is a sign of how much has mounted up outside the Budget announcement. The draft legislation produced in December will all otherwise be implemented substantially as proposed, including the key move away from an "approval" regime where HMRC must read and approve all key scheme paperwork in advance of tax-approved awards being made to a regime where companies self-certify. This is on the whole a liberating change as companies will no longer be reliant on HMRC timescales and forced to agree every single point with HMRC, but is accompanied by a need to register plans electronically and a new risk that HMRC may challenge plans later on the basis of what is still very unclear or incomplete legislation in some areas. As people read the detail of the legislation over the next few years, new fears will undoubtedly arise.

One thing that advisers and companies will need to keep a close eye on are which changes take effect automatically without any need to change rules or other plan documentation and which changes are voluntary for companies to adopt or need plan rule changes. The legislation itself is also not likely to be final word as HMRC are also significantly changing their guidance manuals as part of the change to self-certification and there is still no sign of its views on a large number of issues."

Richard Sultman, Cleary Gottlieb Stein & Hamilton LLP

"It was interesting to see a substantial paper produced by HM Treasury and HMRC on the BEPS project. Certain aspects indicate how the UK system measures up to what may become international standards. In relation to CFC rules, for example, the paper seems to hail the UK code as a model for other countries and suggests that our rules are not expected to require further substantive changes.

On limiting interest deductions, of the two "structural" models being considered under BEPS (earnings-stripping rules restricting the level of debt held by a company or group relative to its income; and models based on allocating or attributing interest across a group), the paper acknowledges that the UK has only a limited version of the second one (the worldwide debt cap). In "looking forward" to the BEPS output and the "identification of best practice", there appears an openness to potential domestic law changes in this area.

Other noteworthy items are the belief that most of the activities currently qualifying for the UK Patent Box would meet tests of substance in the context of countering harmful tax practices, and confirmation that the DOTAS code is one of the models being considered in developing recommendations for the disclosure of aggressive tax planning arrangements."

Michael Thompson, Vinson & Elkins LLP

"Behind the vote-grabbing announcements for pensioners, savers and lovers of beer and bingo, the most significant business tax changes are for the oil and gas sector (maybe I am a little biased by my practice area). With the exception of the strange attack on bareboat chartering arrangements for drilling rigs and flotels, other changes coming in this year are part of a welcome package geared to kick-start shale gas exploration. The package confirms a new onshore allowance, a lengthening of the period for using ring fence expenditure supplement and an extension of reinvestment relief and the SSE to accommodate disposals of exploration interests by pre-traders, and makes a tweak to the mineral extraction allowance rules to give better relief for planning application costs. The exclusion of R&D allowances from the loss transfer TAARs is also a response to lobbying by explorers - but don’t tell anyone or else there might be a state aid issue! For next year’s Finance Bill, a new field allowance is trailed for "ultra high pressure high temperature clusters" which the industry says could alone attract £5-6 billion of new investment. And following the Wood Review into how to maximise economic recovery of up to 24 billion barrels remaining under the North Sea, the whole fiscal regime is up for discussion. So more fun in store on the oil and gas tax front, even ignoring the Scottish referendum."

Vimal Tilakapala, Allen & Overy LLP

"The focus in this Budget was on personal and not corporate tax, but there are some unwelcome anti-avoidance developments to be aware of.

Readers may recall that at Autumn Statement 2013, new legislation was announced aimed at preventing the transfer of profits between group companies through the use of derivatives. The legislation was very broadly drafted and contained few substantive exclusions. It subsequently had to be re-drafted and guidance issued to make sure it was more appropriately targeted. HMRC is concerned that taxpayers are seeking to circumvent that legislation by using transactions other than derivatives, and has announced new and immediately effective legislation to counter this.

The new legislation is extremely wide and could catch many commercial intra-group arrangements. There are no meaningful exclusions other than a motive test. This is likely to cause considerable uncertainty although HMRC’s view is that taxpayers should be able to take comfort from the motive test (and the guidance). From a legal and from a certainty perspective, the introduction of very broad legislation intended to be limited in its application via a purpose test and guidance is far from ideal.

Also of note is confirmation of January’s proposal to require taxpayers which have used schemes disclosed under the DOTAS rules, or subject to counteraction under the GAAR, to make accelerated payment of the tax due. This proposal is troubling for a number of reasons including its retrospective nature. In particular, taxpayers which have made "protective" DOTAS disclosures in the past may now have to make accelerated tax payments. These proposals are likely to have some wide-ranging effects. For example, taxpayers may have to make tax payments which they have not have provided for in their accounts. The amount of tax required by HMRC may also be different from the amount regarded as at stake by the taxpayer. There is also the fear that HMRC may be less willing to settle tax disputes in future, given that it will already have received payment of the disputed tax.

One other point to note is the proposal to launch a short consultation on changing the charging mechanism for the bank levy. The idea would be to group banks in different bands according to their chargeable equity and liabilities and charge the levy at different rates for different bands, with effect for chargeable periods beginning after 2014. The intention to legislate in Finance Bill 2014 looks ambitious, and there are likely to be winners and losers under any such proposal. It is also difficult to see how this would limit HMRC’s tendency to raise bank levy rates each year to maintain the overall amount collected."

Eloise Walker, Pinsent Masons LLP

"This was clearly a political Budget aimed as a crowd pleaser - the measures on beer duty and pensions in particular spring to mind - but on the corporate tax side there was some anticipated tidying up and some useful measures for medium sized businesses (notably the increase in the annual investment allowance) but not a lot that hadn’t already been trailed.

One worrying development, however, was the technical note on "avoidance schemes involving the transfer of corporate profits". It’s like a hammer the size of Berkshire to crack a hazelnut. Or, maybe, a disguised bazooka aimed at adding to HMRC’s arsenal in the war against BEPS – you decide. It’s billed as extending an anti-avoidance measure already planned for Finance Bill 2014 so it’s easy to miss - targeting schemes where a total return swap allows a UK company to claim deductions whilst sending its profits to another group company in a tax haven. Fair enough, and the new measure attacks arrangements that don’t use derivatives, to hit those new schemes already out there working around the previously announced piece of anti-avoidance. All well and good. BUT this new legislation is unbelievably widely drawn. Yes, the guidance has a few examples of arrangements that shouldn’t be hit, but this is a worrying example of HMRC's growing trend to put out widely drawn legislation and then expect us all to rely on guidance for comfort. In light of Gaines-Cooper, how much comfort is that? It’s unclear how this is supposed to interact with transfer pricing and the plethora of anti-avoidance we already have. Conscientious tax managers are going to worry over how they get comfortable their intra-group arrangements aren’t caught. Starbucks, be wary."

William Watson, Slaughter and May

"Yesterday was even quieter than usual on the general corporate tax front. But that won't be how it appeared to the oil and gas industry or the insurance sector.

The major insurers would not have welcomed the Budget even without the announcement regarding defined contribution pension schemes and annuities. The day when they can issue Tier 1 regulatory capital that complies with Solvency II but also qualifies for deductions looks if anything further off; and the government has not yet been persuaded that intra-group issuance on matching terms - by insurers or banks - should be protected from the assault on hybrid instruments that seems likely to result from the BEPS project. The latest salvo from the OECD on this topic, also published yesterday, is doubtless receiving close scrutiny.

The picture is brighter for oil and gas. The surprise attack on bareboat chartering announced in the Autumn Statement will not be quite as draconian as originally envisaged (though hardly conducive to the stable investment environment promised by the government after it suddenly hiked the supplementary charge a few years back). But that aside, the message is generally encouraging and some specific incentives were set out, such as extended allowances for shale gas exploration and the rest of the onshore industry."

Elliot Weston, Lawrence Graham LLP

"Stamp duty land tax and its ugly sister, the ATED, are the taxes that just keep on giving for the Chancellor.

According to HMRC's figures, revenue from stamp taxes on land (including ATED) were 31.8% higher for April to December 2013 than last year. Although it hadn't been trailed in advance, it should come as little surprise that the Chancellor announced the lowering of the threshold from £2m to £500k properties with immediate effect for the 15% SDLT charge to apply to certain corporate purchasers and in due course for ATED to apply.

I wonder if the Chancellor also sees the ATED as a response to calls for a mansion tax? Perhaps in a strange way it makes a mansion tax politically less easy to introduce if the ATED bites at the £500k level rather than £2m. A mansion tax on all homes introduced at the £500k level would presumably catch too wide a group of voters. All those overseas directors in tax havens who have made a comfortable living from part-time directorships on offshore funds are about to get a rude awakening. Their role may no longer be required.

For over 100 years it has been axiomatic that a non-UK company which is centrally managed and controlled in the UK is UK tax resident and so subject to UK tax on its profits. If you wanted a fund to be non-UK resident, you were required to ensure it was managed and controlled outside the UK.

However, as confirmed in the Budget, this is no longer the case for Authorised Investment Funds (AIFs) which are bodies corporate incorporated and resident in a foreign state for tax purposes; such AIFs will not be UK resident even if managed and controlled in the UK. I can see fund managers turning to a much broader pool of talent in the UK to sit on the board of AIFs if they are no longer required to use overseas directors to maintain non-UK resident status."

David Wilson, Davis Polk & Wardwell LLP

"The Budget papers reveal a few interesting details. Multinational groups will note the delay to but extended scope of the new rules for employment-related securities held by internationally mobile employees, and the changes which go some way (although not as far as had been hoped) towards reining in the overly-broad draft legislation on dual contracts. The rules on the transfer of corporate profits look like a potential bear trap – although at least they contain a purpose test. The announcement that HMRC will publish a consolidated manual on the tax treatment of partnerships is good news which I am sure will be widely welcomed.

With not much more to write home about, I wonder: should this be the Budget to end Budgets? The Autumn Statement has increased in prominence with the success of the Government’s "new approach to tax policy making" since 2010. The early publication of draft legislation, with greater scope for comment and consultation, is to be applauded - but does the tax (or even political) calendar really need two set piece occasions? We weren’t looking for fireworks, but few City corporate tax practitioners will have been excited by another Budget box of damp squibs."

Mark Womersley, Osborne Clarke

"This is exciting stuff! But not for the first time the government has proposed a major change which may prove too good to be true. The initially generous A-Day tax allowances have since been seriously eroded, and we must now see whether this latest headline grabbing proposal survives closer scrutiny.

Trustees of DB schemes will face a particularly difficult challenge to manage their members' expectations in the light of these DC reforms. And the position for the LGPS is unclear – large numbers of transfers out would have significant impact, but given its funded nature members may demand the right to transfer to DC."

Simon Yates, Travers Smith

"George Osborne chose to invoke the fratricidal and weak King John in his Budget speech in order to land a cheap punch on Ed Miliband. He might have gone on to add that John was a leader with a penchant for the sudden imposition of arbitrary taxes, and a disregard for governmental propriety so serious that it led to our one and only attempt at a written constitution.

Which brings us nicely to the Salaried Member proposals.

Here we have a policy developed through a consultation process which has been at best shambolic and at worst disingenuous, leading to legislation which quite clearly is not yet fit for purpose. Ever-changing draft guidance has, in various iterations, led to a number of policy u-turns, frequently at odds with oral assurances given by officials in discussions. Only two weeks ago the House of Lords Economic Affairs Committee correctly noted that "there is too little time to settle all the outstanding issues, get the legislation right and enable businesses to adapt to that legislation in time for a 6 April start", echoing the many consultation responses which called for delaying the introduction of the rules.

It is disgraceful that proposals this far reaching are being pushed through when they are so transparently under-developed. It is also disgraceful that the law is so vague that HMRC guidance can apparently be effective to bring all manner of common remuneration arrangements within or without a large new tax charge. And finally it is disgraceful that no serious attempt has been made by the government to address the Economic Affairs Committee's many and varied wholly justified criticisms, let alone adopt any of its recommendations.

Nothing new on this subject was published on Wednesday, although we are told to expect revised draft legislation and guidance next week. Perhaps parts of this version of the guidance will be intelligible. Perhaps, as rumoured, there may be further volteface evidenced within. We just don't know.

In that context it is staggering that this apology for a law is to be effective from April (even though it won't receive Royal Assent until July). But maybe that's fine – after all, HMRC's line is that there's no need to delay introduction as business has had plenty of time to prepare. Perhaps there are more tarot readers configured as LLPs than I had previously realised."

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2014 Budget: Apocalypse: the Budget to end all Budgets... | Practical Law