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  • HMRC, bankruptcy and tax avoidance…. After a fashion

    31 March 2017

    Andy Wood

    A dizzying succession of regulation, legislation and court cases over the last few years will have made clear even to casual observers that HMRC is vigorously pursuing all taxes to which it believes it’s entitled.

    The Revenue’s array of powers to tackle avoidance was enhanced with the introduction of the General Anti-Abuse Rule – or GAAR, for short – in 2013. This was followed, perhaps more significantly, by the introduction of Accelerated Payment Notices (“APNs”) shortly afterwards.

    These measures were of course aimed at what has been described as aggressive avoidance. One recent parliamentary study has suggested, HMRC may be winning the tax “arms race” – the respective efforts by the authorities and some taxpayers to secure an advantage.

    New statistics show that tax evasion and the so-called ‘hidden economy’ continues to account for more than £11 billion in lost tax each year. However, armed with the tools mentioned above, HMRC has become much more effective in clamping down on tax avoidance.

    Over the six-year period examined, the sums lost through avoidance shrunk by more than half – from £5 billion in 2009/10 to only £2 billion in 2014/15. That latter figure is a UK record and represents one of the smallest such deficits anywhere in the world.

    The reason may be in no small part to a continuing number of high-profile cases involving the pursuit of alleged tax avoidance.

    In early March, I was interviewed by media including Sky Sports News in relation to HMRC’s investigations into the use of Employee Benefit Trusts (EBTs) by football clubs.

    Their interest coincided with the start of a Supreme Court challenge by administrators of the ‘oldco’ Rangers Football Club to a Scottish ruling that EBTs were used to avoid income tax.

    Less than a month later, another well-known name is in the firing line.

    The fashion designer and entrepreneur Karen Millen has been declared bankrupt due to her inability to meet a £6 million tax demand ().

    She has claimed that she was advised to invest in a ‘round the world’ scheme in 2001, almost a decade before the Court of Appeal decided that the operation by which shares were sold to trustees in different jurisdictions did not permit participants to avoid paying Capital Gains Tax in the UK.

    Ms Millen, whose name was emblazoned across the front of 130 stores worldwide at the height of her business and whose talents earned her an OBE, was issued with a notice to pay up in September last year.

    Whilst news reports do not make clear why the demand was made several years after the ‘round the world’ schemes were successfully confronted by HMRC, they do underline the Revenue’s ongoing determination to punish those suspected of avoidance.

    I suspect that HMRC does not care about ‘bankrupt’ being a label which the woman behind one of Britain’s leading high street finds uncomfortable.

    The Revenue will be hoping that this is one trend which Karen Millen’s business contemporaries now do all that they can not to follow.

     

     

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