Panorama exposes dodgy company agents

John Stokdyk reviews the latest episode in a concerted drive by the BBC to focus on tax evasion techniques. This time, "sham" company directors and look-the-other-way providers of complex shelter structures were given the hidden camera treatment.

Over the past 10 years, Richard Murphy at Tax Research UK, Richard Brook at Private Eye, The Guardian/Observer and The BBC’s Panorama have pushed detailed analysis of tax avoidance into the media mainstream.

Continued...

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Comments

The impression I get is that    3 thanks

Mike Bassy | | Permalink

The impression I get is that tax avoidance is now widespread in the UK. The Guardian recently even named a builder in Rotherham as having set up a British Virgin Isles account, allegedly to  to avoid tax on a barn conversion. 

We've become used to - and, indeed, almost expect - big corporations to take steps to avoid tax, rightly prompting calls for draconian action. However, when even small businesses now think it is well worth their while to incur the trouble and expense to set up off shore accounts, isn't it time that we asked ourselves a more fundamental question: Is UK tax much too high ?

All laws depend upon the consent of the people to be effective. The fact that anyone who can avoid paying tax now thinks that it is right and proper to do so, does seem to suggest that past Governments have killed the goose which laid the golden egg. The way that Government has spent taxation hasn't helped either. Seeing asylum seekers housed in £2,000 a week homes and knowing that many benefit claimants are better off than those in work will have further eroded the public's confidence in the tax system.   

However, there is a more fundamental issue looming large on the horizon. If the Government has indeed lost the consent of the people over taxation, how on earth does it re-establish a tax paying culture in the future, without locking up ten of thousands of people in the process ? And if it fails to re-establish this culture, how does it pay for welfare, education and the military as well as all of the other state structures ?

Another interesting facet is also emerging which may shed light on the government's thinking on this issue. Government has known for years about these loop holes, but has never really taken serious action against them. In addition, the Government's recent attempt to abolish planning permission for home extensions, thus removing all record of who did the work,   would have been a boom in cash-in-hand builders.  All of which prompts me to ask: has a Government economist come to the conclusion that turning a blind eye to tax evasion is a wonderful way to unofficially inject cash into a recession hit economy, while side stepping the need for, and political cost of, yet more fiscal easing ?     

          

Is UK tax much too high?    4 thanks

andrew.hyde | | Permalink

The question is political, of course, so if you answer 'yes' then the answer is to vote for the party that promises to slash (as opposed to 'tinker with') tax rates.

Now, you're about to tell me, quite correctly, that none of the major parties has this on their agenda.  So does that answer the question?

Another way to look at it is to compare UK tax rates with other comparable economies. Basically that means Western Europe.  Does that answer the question?

Moving to the USA, BVI, Mauritius, Russia or wherever could make you better off.  But in my very humble personal opinion tax exiles usually lose more than they gain. Living in the UK has many, many benefits, but it costs. I don't think the cost is too high - but on the other hand I'm not a millionaire (and not too bothered about it).

It does make you wonder?    2 thanks

The Black Knight | | Permalink

Behind a smoke screen of media outbursts about being serious about tax evasion the action on the ground has been pathetic.

HMRC appear not to know what they are looking for, even when it is as plain as their noses, and unable or unwilling to do anything.

The laws are there but no one is in?

the conclusions one can draw are:

1, We don't have a problem....and it has all been a good story.

2, There is a monumental cock up in civil service thinking and this is all a cover up.

3, Those in charge have a vested interest in sinking the ship.

I really do not understand why there are not more prosecutions for tax evasion 100 a month could be easily achievable and once these criminals have lost their houses in the following proceeds of crime confiscation many more would suddenly increase their currently voluntary contribution.

This has to be the most profitable action the government could take.

Just to add    3 thanks

alancow.harveys... | | Permalink

I don't think that the MP's expenses fiasco has helped.

Hard working people are tired of seeing their tax money wasted and have lost their belief in government, some members being caught with their noses in the trough.

I spoke to a client shortly after the news broke regarding MP's expenses, a man who had worked hard all his life and even through the lean times hadn't claimed off the state, even though he was entitled. He was a proud man. He told me that he was out of work again only from now on he was going to claim every penny he was entitled to. I think this illustrates the change in attitude many taxpayers feel about not only how much is taken off us but how the money is actually spent.

Shakes head in despair    2 thanks

ThornyIssues | | Permalink

Mike Bassy wrote:

The impression I get is that tax avoidance is now widespread in the UK. The Guardian recently even named a builder in Rotherham as having set up a British Virgin Isles account, allegedly to  to avoid tax on a barn conversion. 

We've become used to - and, indeed, almost expect - big corporations to take steps to avoid tax, rightly prompting calls for draconian action. However, when even small businesses now think it is well worth their while to incur the trouble and expense to set up off shore accounts, isn't it time that we asked ourselves a more fundamental question: Is UK tax much too high ?

All laws depend upon the consent of the people to be effective. The fact that anyone who can avoid paying tax now thinks that it is right and proper to do so, does seem to suggest that past Governments have killed the goose which laid the golden egg. The way that Government has spent taxation hasn't helped either. Seeing asylum seekers housed in £2,000 a week homes and knowing that many benefit claimants are better off than those in work will have further eroded the public's confidence in the tax system.   

However, there is a more fundamental issue looming large on the horizon. If the Government has indeed lost the consent of the people over taxation, how on earth does it re-establish a tax paying culture in the future, without locking up ten of thousands of people in the process ? And if it fails to re-establish this culture, how does it pay for welfare, education and the military as well as all of the other state structures ?

Another interesting facet is also emerging which may shed light on the government's thinking on this issue. Government has known for years about these loop holes, but has never really taken serious action against them. In addition, the Government's recent attempt to abolish planning permission for home extensions, thus removing all record of who did the work,   would have been a boom in cash-in-hand builders.  All of which prompts me to ask: has a Government economist come to the conclusion that turning a blind eye to tax evasion is a wonderful way to unofficially inject cash into a recession hit economy, while side stepping the need for, and political cost of, yet more fiscal easing ?     

          

Surely you mean illegal EVASION and not legal AVOIDANCE?

 

 

Easy pick    4 thanks

Charles Kwan | | Permalink

Good to have the awareness of what is going on in real life.   BBC should film another Documentary about Tax.... HMRC treatment of the Rich large companies vs Poor small businesses.....

 

Rich individuals, at least, have money to use dodgy scheme and stop the HMRC at the door but the poor small business owners struggling to have their end meet and always being targeted by the HMRC and yet have no funding to hire tax adviser to defend themselves.  That is how the tax office allocate their resources as they are the easy pick and would gain more revenue form the Poor than the Rich.

 

You tell me this Society is fair ....   I don't.   Unfortunately whichever parties you vote for,  they follow the same policies and never try to change the tax law.  

 

 

I haven't seen the programmme, but...

Trevor Scott | | Permalink

... looking at the quotes fees there seems to be a lot of people getting ripped off. Foundation with shell companies, self owning trusts, bank accounts etc shouldn't cost more than an intial $5,000.....from decent companies who advertise openly on the internet.

@Easy pick    3 thanks

The Black Knight | | Permalink

There are also a lot of small businesses that evade considerable amounts of tax.

HMRC do however pick the wrong cases time and time again and it cannot be effective for them.

They are also useless, I have seen them identify missing takings but only half of them, then not charge the vat as well....and completely ignored the illegal cash in hand workforce.

Whilst quite prepared to bully the innocent they take a much more lenient view of a serious offender.

The secondary effect is that the tax evaders are successful as they are more profitable after tax have more resources to expand, knocking out genuine taxpayers and so the deficit increases.

It's about time the honest were supported otherwise more will turn to the dark side as a matter of survival.

Panorama

HUGH W DUNLOP | | Permalink

I have often been amazed at the speed with which some accounting firms are able to promote schemers to counter new tax laws. It is almost as if they have 'insider knowledge'  Are there any figures as to the number of tax officials who either sit on the board of, or are retained as advisers by, accountancy firms/ financial advisers.

However, I, and some of my colleagues are under the impression that the much publicised crackdowns on smaller firms evading tax may be counter productive. There seems to be a lack of direct action by HMRC to implement their 'threats' (promises).

This has apparently led to many small unregistered tradesmen saying ' I have got away with it so far, if I own up I will probably be fined, so I may as well carry on as I am''

Do any others share this feeling?

Paul Scholes's picture

Awareness & publicity is important    5 thanks

Paul Scholes | | Permalink

I agree with much of what has been said above but opening the above, dodgy expenses, international trasfer price fixing, K2 and let's not forget McLaren's tax relief on fines, to public opinion has far more impact than government's or HMRC's pronouncements over what needs doing.

I've heard for example that many large firms, who would have been in the thick of tax mitigation schemes only a few years ago, are now out of the market, they may be legal but it's not worth the grief.

Dig deep enough on any of this and you will hit ethical values, people either treat tax as an avoidable overhead (whether it's 10% or 50%) or a responsibility that comes with living in a secure and looked-after country.

I listened to a programme yesterday about the 1942 Beveridge report on the founding of the Welfare State and it was interesting to hear that the middle class who, on the whole, would see little benefit, where overwhelmingly in favour in order to help the less well off.  It was war time and the country lived and pulled in concert.  I don't have any doubt that this would not be the case today.

£0.02    4 thanks

ThornyIssues | | Permalink

Paul Scholes wrote:

I listened to a programme yesterday about the 1942 Beveridge report on the founding of the Welfare State and it was interesting to hear that the middle class who, on the whole, would see little benefit, where overwhelmingly in favour in order to help the less well off.  It was war time and the country lived and pulled in concert.  I don't have any doubt that this would not be the case today.

Indeed, but I fear the damage is probably irrepairable. What we have is institutionalised greed across society. This starts with politicians themselves who in turn, pratice politics of greed and envy. This leaves a bad taste in the electorate's mouth leading to a "well if they can ....." attitude. Secondly, we see an increase in the black economy because of the law of deminishing returns in the tax system that sees those who try to be compliant rendered frustrated and demoralised. Nothing short of a complete overhaul of the tax system to simplify, reduce the cost of collection, create a more level playingfield and take sight of the global effects on corporation tax will do. 

johnjenkins's picture

I try to watch    1 thanks

johnjenkins | | Permalink

the customs & excise programs. One particular sums it all up. Customs raided a butcher who was employing illegals. All admitted being here illegally. Those without passports were told to report to an immigration office. Of course they didn't. The point here is that Customs had the illegals and let them go. We can't deport someone who is a National security threat.The police watched the riots last year and did nothing. We moan about HMRC etc. and do nothing etc. etc.

Yet we have a compliance and penalty culture that is a money generating machine for the Government.

We have tax evasion and tax avoidance yet still Government won't legislate. The EU can't agree a budget because of wishy washy politicians.

The Hippy culture really has taken over.

So I'm off in my motorhome this weekend, singing songs round a campfire, chillaxing, ready for Monday's start of the silly season.

Paul Scholes's picture

Or maybe we need another war?    1 thanks

Paul Scholes | | Permalink

Under our current 4-5 year governments and certainly with a coalition(ish) government in place, we are not going to see the radical overhaul of the tax system, besides which tax has always been a bit of a blunt instrument in changing peoples' ethical practices, ie they do or don't do something because of the tax money not because they necessarily see it as right or wrong.

Rather, I fear, what we need is a wake up call, something to shake us out of our "all for me" "must have more" to make us realise that we live with, and must ultimately rely on, others.

Reference my comment above about how things were more that way in wartime, war is a great leveller, in more ways than one.

I share the view of those in the know, that we are currently in a phony war with the planet and its resources. The scientists (and even the World Bank & PwC) tell us that potential disaster is now only a few years away but all we see are a few freak weather events, birds, fish & insects where they shouldn't be and a few scare stories about Europe not being able to feed itself and (god forbid) how we may have to keep our mobiles for more than a year.

So, one suggestion might be to consume, pollute & waste as much as we can, we need Gaia to "bring it on", "let's see what she's got".  We won't win the war but at least we'll care more about each other whilst we're losing it.

Plan to Stop It    2 thanks

North East Acco... | | Permalink

1. cut out all government waste (if policiticans not got bottle to do it bring in outsiders)

2. leave EU

3. Abolish all silly EU rules and red tape

4. cut tax rates

5. Imprison tax cheats who break the law. Publish names locally and nationally.

6. Penalty for deliberate tax cheats. 100% of worldwide assets.

johnjenkins's picture

@NEA

johnjenkins | | Permalink

5 and 6 is all very well for us poor buggers. What about the mega rich who always find a way round.

We will never leave the EU, in fact the longer this pulling apart goes on, the more that the EU politicians will want a United States of Europe. As Paul says, in war time people pull together, perhaps if Europe were to be totally united we might be able to solve some of the problems. A choice will have to be made, and soon, cos we can't keep messing about like this.

A Solution?

Peter Tucker | | Permalink

The fact that an individual is appointed as a Director of a Limited Company means that the individual is an Office Holder. It is therefore interesting to note that according to official HMRC instructions an
Office Holder is an Employee -
http://www.hmrc.gov.uk/manuals/pommanual/paye82002.htm

The fact that an Individual is an employee means that their employment is required to be notified to HMRC. The fact that the Employee may be in receipt of little or no wages or salary from this particular
employment is not a bar to the reporting of this information.

Were HMRC to be aware of the directorships of all Limited Companies, it would be possible, through the use of properly designed software, to identify situations where Directorships could pose a risk to tax loss or problems with money laundering.

It is odd that HMRC has no imperative to ensure that every appointed Director is notified as an employee in order to update its PAYE Database. Indeed, HMRC will formally advise that there is no need for an Employer PAYE reference to be created for a Limited Company if there is no wages or salary being paid to Employees – Directors being employees.

We are therefore in the strange situation where HMRC will impose penalties on Employers where they fail to notify the commencement of an ordinary waged / salaried Employee, BUT take no action, indeed one could say encourage, the failure to notify the commencement of an employment, if that employment is a Directorship. The fact that Directors may have no salary but may be in receipt of taxable Benefits in Kind would also appear to be overlooked.

If one were to assume that there are some 400,000 Limited Companies each with 2 Directors not in receipt of a salary and therefore not on HMRC’s PAYE Database and that 25% of these Directors were in receipt of Benefits in Kind amounting to, say, £1000, the potential tax loss could amount to approximately £40 million, assuming a basic rate of 20%. Of course these are only suggested statistics, but the real issue is that because of the way HMRC currently approaches Directorships and Limited Companies, no one knows if these figures are over or understated.

Paul Scholes's picture

These are offshore companies

Paul Scholes | | Permalink

Peter - these are offshore companies, ie in other countries not UK conmpanies who have to report directors to HMRC.

Off Shore ?

Peter Tucker | | Permalink

Regrettably these are not ALL Offshore companies otherwise we would be attempting to be like the US and police the entire world?

Tax Dogers

M Shapland | | Permalink

My father always said that if the Government wants to raise £100 M it was more likely to raise it by charging £10 each from 10 M not rich people than by trying to get £1M from 100 very rich people.

This is told me over 40 years ago and this has not changed...

johnjenkins's picture

@MS

johnjenkins | | Permalink

By and large that was stuck to. Then we had the last recession and Mr Major and co decided "not a good thing for re-election prospects". Now everything is done with the electorate in mind. Normally in a 5 year term Governments had 3 and a half years to do all the bad stuff then redeem themselves in the last 18 months to get a chance of re-election. These days they are frightened to sneeze, unless of course they can claim the tissues on their expense account.

tax dodgers

M Shapland | | Permalink

If hte Mayans are right, after the 21 December 2012 it won't matter anyway!!!!

 

There has always and there will always be persons who will break the rules or push them to the limit whithout any regards for the morality of their actions. The difference is that now with interent and fast transmission of information it appears that there is more of it..

 

All one can do is do their best in theri own life and if enough of us do this then maybe one done the "bad apples in the barrels of the world" will disappear.

 

Somehow I don't think it will happen in my lifetime..

 

HMRC and avoidance

ThornyIssues | | Permalink
johnjenkins's picture

Love it

johnjenkins | | Permalink

Have you also heard that HMRC have applied to be on the register of entities that are allowed to break the speed limit. Presumably the thinking is that you can collect more penalties if you go faster.

HMRSweeney starring Osbourn and Gauke with a cameo performance by Hodge.

Telegraph Article

chatman | | Permalink

Would the directors have had any remedy if HMRC had not sued them personally?

Whoa!

andrew.hyde | | Permalink

Try as I might, I'm struggling to see the relevance of the last 4 posts to the central topic.

Panorama perhaps wisely did not attempt to suggest any remedies within its half hour slot.  Perhaps the answer is that our national newspapers should be allowed to hack into the phones and computers of the people selling these nominee companies, then publish the results.

OK I'm only kidding, but there's a serious principle behind this.  We rightly try to protect the privacy of people who deserve it - the McCann and Dowler families, Ms Rowling, Mr Grant (maybe) - but in doing so we provide a cloak for the people featured by Panorama.  Even if the UK opted for more transparency in business, that would make no difference to countries like Panama. 

I suppose we could invade them, but we and the Americans have tried that a few times and it didn't work out that well.

US Invasions

chatman | | Permalink

andrew.hyde wrote:
I suppose we could invade them, but we and the Americans have tried that a few times and it didn't work out that well.

It has worked out quite well for those with power in the US; their foreign invasions have brought in loads of money for them.