The news that the Government is planning to name and shame tax cheats has been broadly welcomed, but tax experts are calling for new legislation to remove the grey areas so there is no room for doubt.
The new rules include greater access to information from tax avoidance schemes to identify customers and warn wealthy individuals over their actions.
Another proposal would see tax avoidance providers that have broken the rules being forced to reveal details of their schemes.
The move follows a wave of revelations about the financial loopholes used by the rich and famous to legally side-step hefty tax bills.
Last month comedian Jimmy Carr admitted to making a “terrible error of judgment” after it emerged he used a complex scheme to reduce his tax bill.
The K2 tax-avoidance scheme he is said to have used enables members to pay income tax rates as low as one per cent.
Mr Carr was criticised by Prime Minister David Cameron who said his use of an offshore tax scheme was “morally wrong”.
Research from the Tax Justice Network estimates that rich individuals around the world have exploited loopholes in different nations’ tax regimes to shelter as much as $20 trillion (£12.7 trillion) in wealth from tax authorities.
Tax avoidance represents nearly 14 per cent of the UK tax gap, according to the Treasury.
Treasury Minister David Gauke said: “We are building on the work we have already done to make life difficult for those who artificially and aggressively reduce their tax bills.
“These schemes damage our ability to fund public services and provide support to those who need it.”
He told the Policy Exchange think tank that scheme operators will be “named and shamed” for sharp practice.
Officials often hit a dead end when investigating schemes that are based off-shore, but under the proposals UK promoters will be made to hand over customer databases.
That information will be used to formally warn clients directly about the deals they have signed up to and to work out how much tax they owe if the scheme fails.
Under the reforms, which will go out to consultation, a promoter who has been penalised for not complying with the rules will also have to provide extra information to HMRC on all of their schemes, not just the one they were reprimanded for.
“These schemes harm businesses by distorting competition,” said Mr Gauke.
“They damage public confidence. And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.”
Tom Roseff, senior tax manager at Harrogate-based accountancy firm Saffery Champness said: “We’d agree that toughening up the rules is no bad thing, but it needs to be dealt with with legislation.
“Tax avoidance is a broad spectrum and the issue is where to draw the line. The onus should be on the Treasury to change legislation.”
Matthew Sinclair, chief executive of the TaxPayers’ Alliance agreed: “The Government is right to act to ensure that everyone pays their fair share of tax, but new powers to uncover specific abuses are a poor substitute for serious reform of the tax system so that there are fewer loopholes.”
Mr Roseff believes the vast majority of taxpayers want to operate within the law.
“They’re not interested in anything racy. They want compliance. That’s why they knock on our door,” he said.
“We need clear guidance as there are too many grey areas.”
Mr Roseff said that any changes must not make life so onerous for the rich that they consider moving abroad.
“If the UK is to compete effectively we need wealthy individuals here. We need a competitive tax regime to encourage people to stay in the UK,” he said.
Mr Sinclair believes that Ministers need to be more realistic about HMRC’s ability to clamp down at a time when its resources are stretched simply administering “hideously complicated” taxes.
“With a better tax system, HMRC staff can focus their attention on tackling those who are abusing the system. Proper reforms can ensure that everyone pays no more, and no less, than their fair share,” he added.
Like many tax advisers, Mr Roseff would welcome a change in the law to make it clear what is legal and what isn’t.
“It can be incredibly frustrating as there is a horrible moral blurring. We don’t want to advise clients on morals. If I wanted to do that I’d be a priest,” he said.