01925 363 006

Seven-year itch – Have taxpayers been casualties of HMRC’s effort to meet challenge of ‘mass avoidance?

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

It was Harold Wilson – the pipe-smoking former Prime Minister beloved of 1970’s television mimics – who was credited with coining the phrase about a week being “a long time in politics”.

I would love, therefore, to hear his impressions of a seven-year period on the authorities’ efforts to clamp down on tax avoidance.

In November 2012, the National Audit Office (NAO) produced a report which suggested that HMRC was struggling to deal with a large number of matters involving “marketed” tax avoidance schemes.

Trying to find out both how the Revenue had responded to the threat and how it was resolving a broad range of other tax disputes, the House of Commons’ Treasury Select Committee launched a brace of inquiries early last year.

Its conclusions have now – finally – seen the light of day after formal sessions to take evidence from 10 individuals in person, a further 155 written submissions, numerous meetings and even a research trip to the Isle of Man.

Taking HMRC’s contributions at face value, things appear to be generally positive.

According to one senior official, marketed avoidance is very much on the decline. In 2005, the Revenue was notified about 600 schemes, compared to just 15 in 2017.

As for the film schemes which have assumed large amounts of cash and news coverage, he was quoted as boasting that “there there are no equivalents of those schemes around now”.

Given the estimated £500 million tax bill facing the celebrities and business men and women following a defeat suffered late last month by one such scheme, Ingenious Media, one can understand why that might be the case.

Glance behind the headlines, though, and it’s also easy to see why the Select Committee has pronounced itself “concerned” at HMRC’s admission that some 80,000 cases from the days examined by the NAO remain unresolved.

That’s despite the Revenue acknowledging that successive changes to statute and case law in recent years as well as a strengthening of the network of international tax jurisdictions have provided it with “pretty well got the full hand that we have been looking for“.

Those developments include, of course, the introduction of Accelerated Payment Notices (described to the Committee as “probably the biggest game changer…[a] seriously large dampening effect on new avoidance”), the aggressive crackdown on disguised remuneration schemes via the ‘loan charge’ and the Common Reporting Standard (CRS) which has extended the scope of HMRC’s intelligence across the globe.

Arguably most controversial of all is the ‘loan charge‘, which MPs judged to have “caused widespread anxiety and distrust” of the process to settle outstanding bills.

The Committee did dole out something of a back-handed compliment for the Revenue’s administration of the ‘loan charge’ (“sensible”) – an adjective also applied to the promise by the new Financial Secretary to the Treasury, Jesse Norman, that taxpayers whose admission of using such schemes had been fully considered but not challenged by HMRC would not face new bills.

Nevertheless, MPs seemingly aren’t prepared to let the Revenue off lightly, demanding it provide details of how many individuals – and how much cash – it’s writing off.

Similar checks are being sought on what HMRC is doing with all the additional information coming its way under the CRS.

Parliament, in fact, has demanded a report on the scale of such data and the patterns of “offshore non-compliance” which it has brought to light.

Almost echoing the situation which prompted the NAO’s concerns seven years ago, the MPs have warned of “the dangers of building up a large stock of offshore evasion enquiry cases”.

With an eye surely on the questions posed by HMRC’s decision last year to extend the assessment period for such matters to 12 years, the Committee insisted that the Revenue allocate the necessary resources to ensure that”cases are brought to resolution as quickly as possible”.

The Select Committee report is not the kind of savaging to which HMRC’s top brass have become accustomed to over the last few years.

It is, however, exacting in its own way, as in the pointed observation that “more can be done” to support the “vulnerable” taxpayers with whom the Revenue deals.

A further signal that examination doesn’t have to equal the confrontation frequently seen in HMRC’s exchanges with Commons’ colleagues, the Treasury Committee was keen to “take this opportunity to remind the tax authority that it must be fair and consistent in its application of tax measures“.

The statement illustrates that, regardless of the time which has elapsed since the NAO’s in-depth look at avoidance, the amount of scrutiny of the taxman’s performance doesn’t get any less.

 

If you or your clients have been affected by any of the matters raised in this blog then please get in touch.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.