Upfront payments go forward in Finance Bill

MPs approved the clauses that will force investors in disputed schemes to pay tax up front, but there will be a legal right of appeal.

MPs on the House of Commons Finance Bill committee took in a raft of amendments during June, but crucially for those lobbying against accelerated payments and follower notices, it approved the legislative clauses that will force investors in tax avoidance schemes to pay disputed bills immediately.

However the Chancellor did include a new clause defining the circumstances in which a taxpayer could challenge HMRC's ruling that a scheme was similar to one ruled out of bounds at tribunal and therefore subject to the upfront payments. The grounds for appeal now include arguments that the specified judicial ruling was not relevant to the chosen arrangements, that notice was not given within the specified period, or that there were reasonable grounds for the taxpayer not to have taken corrective action.

Contrary to some of the fears voiced by those within the profession, the act will include the right to appeal penalties raised for non-compliance with follower notices (known as section 201 penalties).

When the law is enacted, experts predict a wave of high-profile bankruptcies, reports the Mail on SundayThe impact on specialist tax boutiques will be almost as significant.

Aidan James – a tax scheme promoter who put 60 of clients into a tax avoidance scheme involving second-hand cars and used by DJ Chris Moyles – has hired lobbying firm Whitehouse Consulting to fight advanced payment notices. Many of the same arguments have also been advanced by advisers such as Peak Performance as well as AccountingWEB members and other tax profession representatives who were concerned about the lack of judicial recourse if HMRC decided a scheme was caught by the new regime.

Meanwhile, back at Westminster, the Finance Bill is now approaching the report stage in the Commons and will then go to the House of Lords for a one-day legislative review. Amendments brought forward for the Commons report stage range from during relation to oil contractors where draft legislation has been under discussion over the past couple of months.

AccountingWEB's Finance Act, tax consultation and Budget coverage throughout the year are sponsored by TaxCalc, the award-winning supplier of tax and practice software.

Comments

The start of a slippery slope!

Cynical_Templar | | Permalink

Regardless of your view on schemes, this is the thin end of the wedge.  HMRC get to force the up front payment of disputed tax with no reference to tribunals or the courts.  How many years before this gets widened to disputed tax on other enquiries?

Thank Goodness Someone Has Noticed

Trethi Teg | | Permalink

Thank you Cynical. Someone has noticed.

 

So far the majority of AW comments (who are supposed to be looking after the affairs of their clients) have concentrated on the moral issues surrounding "schemes", many getting on their soap boxes. They totally missed the point that HMRC are gleefully using the support of the Government and the public to push through draconian measures that Lenin or Hitler would have been proud of.

These measures will come back to haunt us accountants in the next few years as RTI is currently doing.

Its about time accountants in practice (not ICAEW representations) started to represent the interest of their clients by putting collective pressure on HMRC to stop this downward spiral. Threaten to file all SA tax returns on line in the last two weeks of January and see what chaos that will cause HMRC.

 

Time to wake up and smell the coffee!

 

Indeed

Cynical_Templar | | Permalink

Especially when take this measure together with the Debt Management & Banking proposals to take money from direct bank accounts thereby giving themselves an effective preference that is not afforded them by insolvency law!

holding off filing tax returns is not in cliebts interest    1 thanks

Jekyll and Hyde | | Permalink

Trethi Teg wrote:

Thank you Cynical. Someone has noticed.

 

So far the majority of AW comments (who are supposed to be looking after the affairs of their clients) have concentrated on the moral issues surrounding "schemes", many getting on their soap boxes. They totally missed the point that HMRC are gleefully using the support of the Government and the public to push through draconian measures that Lenin or Hitler would have been proud of.

These measures will come back to haunt us accountants in the next few years as RTI is currently doing.

Its about time accountants in practice (not ICAEW representations) started to represent the interest of their clients by putting collective pressure on HMRC to stop this downward spiral. Threaten to file all SA tax returns on line in the last two weeks of January and see what chaos that will cause HMRC.

 

Time to wake up and smell the coffee!

 

Afterall this may prevent smaller business clients obtaining adequate finance. I feel that there is a lot of scare mongering going on here by the accountants that have made money acting and dealing with the schemes. As for members in practice not looking after their clients I couldn't disagree more. A lot of members in practice are loathed by the things this establishment does, for example restricting basic rate tax on the middle earners and putting more people into higher rate tax.

The only positive thing I can bring, which I brought to this forum in 2010 is to establish a trade union for members in practice. Perhaps such a movement could be financed by some of the wealthy clients using such schemes for the benefit of all.

Simply having accountants complain to HMRC individually does bugger all as HMRC just ignores them.

ShirleyM's picture

The chickens coming home to roost    1 thanks

ShirleyM | | Permalink

The dodgy avoidance schemes (many of which should be described as evasion & fraud) are the reason and the root cause of this legislation.

Who creates and promotes these dodgy schemes? They are the people who should be held responsible, not the government or HMRC.

If innocents get caught up the aftermath, then that is what usually happens ... they are the ones that are unfairly treated as the stable door gets closed for everyone, but let's not forget who caused it to close.

EDIT: the following link makes interesting reading ... especially question 103 ....

http://books.google.co.uk/books?id=mi5kA4T-E_MC&pg=PA2&lpg=PA2&dq=aiden+james+tax+trade&source=bl&ots=xsm3Trb1Tm&sig=bhmxJL05aAQndPWOhOTZBeuMa90&hl=en&sa=X&ei=x_-0U7moLMahO6-DgZgK&ved=0CGYQ6AEwBw#v=onepage&q=aiden%20james%20tax%20trade&f=false

Question to Aidan James (see opening post):

Q103: How many of the schemes you have marketed are now illegal

Aidan James: most of them

Ian Swales: most of them?

Aidan James: all of them, I suspect

Typical Response

Trethi Teg | | Permalink

I am surprised it has taken the "soap boxers" so long to comment.

As usual they missed the point of my comments as they are preoccupied by the issue relating to "schemes".

My comment was aimed at protecting the innocent (the vast majority of our clients). I would rather act to protect them than simply tell them that they are the innocent victims of these nasty people who promote "schemes". I actively seek to look after my clients interests rather than simply blame HMRC et al and then send them a bill for my "services".

With regard to the formation of a "trade union", then I would prefer to call it something else, but essentially I would support an organisation which supported and represented the real interests of the smaller practicing accountants (please do not mention the ICAEW) and used their influence to bring HMRC and Government to their senses.

 

ShirleyM's picture

As usual ...

ShirleyM | | Permalink

Hypocrisy. Do you not have a soap box, too?

You missed my point, too! Would you rather they allowed mass scale avoidance/evasion?

This is ALWAYS the result where new legislation hits everyone, not just the guilty parties. It is hardly a surprise ... but I suppose it is better this than having all loss relief & trusts scrapped.

That would really hurt the innocents.

Do you have any proposals for solutions that would hit the guilty, and not involve the innocent?

Proposals

Cynical_Templar | | Permalink

 

Yes i have workable proposals.

Give taxpayers the right of appeal to the tribunals (and onwards) if they feel an accelerated payment notice is incorrect.  At the moment, there is no such right.

It is in nobody's best interest to allow HMRC to calculate potential tax (i know they consider an APN not to be tax) which not right of appeal to an independent body.

This is not suggested as a measure to protect people who have undertaken schemes but instead to protect everyone one of us ordinary taxpayers.

 

I think he has missed my point too.    1 thanks

Jekyll and Hyde | | Permalink

The clients I represent, that is the small business community, already have few rights and hmrc have already taken a massive chunk of further rights away, but I do not hear the same calls being made surrounding:

I 35

New agency legislation from April 14. What small business keeps adequate document, let alone to support HMRC abusing their authority on this.

RTI and auto enrolment, which will end up putting some small businesses out of business.

Stopping payments of SSP.

Shall I continue, because I do not hear the same cries coming in connection to the above.

So yes I do listen to what other accountants are saying, I do wish Harry Rednap had lost his criminal case and I do listen to what is going to happen as HMRC role forward phase 3 of their plans.

However drumming on about how everyone else must see this specific potential abuse in isolation to all of their other abuses is just sheer crazy. It is one of many potential abuses, that could stretch further should HMRC do that.

As for not calling such an organisation a trade union, people can call it what they like. Essentially it would be a trade union and I call things as I see them. Shame those scheme providers used the words tax avoidance for something else.

ShirleyM -I love you but:

David Gordon FCCA | | Permalink

 

Please, stop equating tax avoidance with tax evasion.

 There is no "Morality" in taxation. It is a deal between  taxpayers that they elect a group of taxpayers to arrange for the collection and redistribution of funds and or the payment for services best rendered from a central office. e:g: Defense or Education, or NHS and so on.

 That group of taxpayers for the better administration of the collection and distribution of the funds, has a mandate to create and fund a paid staff to deal with said administration of funds so collected. -HMRC-

 If the said elected taxpayers (members' of parliament) have collectively F***ed up their instructions so as to write a set of regulations which in many respects are as mysterious and elastic as the local whore's undergarments, you must expect old uncle Tom Cobbley and all to use them to their best advantage. If they get it wrong they pay the tax and penalties, tough luck. That does not make them crooks or dishonest.

It may make them look idiots, for believing similar to (State Building Society) Dodgy Finance Plc may pay them 18% p.a. when the bank rate is 5%.  Nevertheless if Clever Clogs Tax advisers & Co sincerely believe their reading of tax regulations is lawful, then they are fully entitled to so claim. If the Court says they are correct, there is no tax avoidance because they are correct.

What the present system is doing, is allowing MPs to write/approve junk, and then fix it so that HMRC may  repressively enforce the junk without fear of any "Ordinary" taxpayer being able to afford to challenge them.

As far as Del Boy Tax advisers & Co are concerned, after fifty years in the profession I am no longer surprised at the number of otherwise intelligent persons who will travel from supermarket to supermarket to get a can of beans a half-penny cheaper, but who are prepared to hand over buckets of cash in fees etc, because the mention of the word "Tax" scrambles their brains.

 

 

 

 

I agree that the morality

MarkKing | | Permalink

I agree that the morality point is not up for debate here. People are entitled to their views. Arguing if "immoral" advisers or "incompetent" lawmakers are at fault isn't really the point here.

The point is that HMRC were being given the power to be judge, jury and executioner in disputed tax matters and that they were also given the power to seize the funds if the taxpayer refused to make payment. It is these two powers in combination with a woeful history of incorrect HMRC assessments that got people concerned.

Whilst the powers are currently restricted to so called "dodgy" tax schemes, how long before HMRC is allowed to help themselves to incorrect PAYE/NI/CIS/SA amounts left, right and center?

Mark you are behind the times

David Gordon FCCA | | Permalink

 

 Mark you are behind the times. VAT appeals operate under the rule that the VAT must be paid prior to the appeal.

 It is then a lengthy process, fee costly,  appealing for suspension of that rule.

 The consequence is that many VAT rulings go by default.

 Then, when one receives in March 2014, a letter from HMRC (VAT) beginning, I quote, "In reply to your letter of 2nd February 2012"- One begins to taste the full flavour of the insidious repression practised by HMRC.

 It is not, God forbid,  that HMRC is composed of a bunch of proto-Stalins. It is that an administrative department has by default been negligently allowed to not only administer but in effect also to increasingly de facto make the rules to suit itself.

I believe that many of us with audit experience will have observed that if you allow the accounting department excessive power to dictate how the business is run, the result is no business.

 Towards the end of the 19th Century statisticians observed that if London expanded at as it was so doing, it would within a few years be three feet deep in horse manure. So, perforce we turned to the motor car 

 If tax regulation and misrule continues to expand at a rate similar to the previous twenty years the same argument applies. Taxpayers will give up, and we end up with a Greek attitude towards tax and financial government.

 

 

Thankfully David

MarkKing | | Permalink

We seldom have to deal with the administrative circus that is the HMRC VAT department.

I have the dubious pleasure of keeping myself "amused" with dealing with PAYE, RTI and (shortly) auto-enrolment problems instead of VAT.

Any rules change that removes HMRC's incentive to move investigations forward cannot possibly be good for the taxpayer. If you have a scenario where HMRC receive the disputed money upfront (for any tax, irrespective of avoidance scheme or not), they have absolutely no reason to commit resources to its resolution. Resolving the case can only lead to two possibilities.

1) HMRC wins and gets to keep the money it already has - I guess they can at least close the file now

2) Taxpayer wins and HMRC have to repay the funds

I see no reason under these proposals why HMRC would look to close cases where they have already obtained the best result they can hope for.

MP's do have some common sense after all

Trethi Teg | | Permalink

"British tax authorities have been accused of attempting to ride roughshod over Magna Carta in pursuit of new powers that will allow them to raid the bank accounts of those who fail to pay their dues.

MPs on the Treasury Select Committee said they were “horrified” by the proposals which HM Revenue & Customs (HMRC) says it needs to recover tax from 17,000 “recalcitrant debtors”.

 

Rather goes along with what I said originally although I didn't expect MP's to be so perceptive.

Presumably Shirley M will now say that 17,000 tax avoider's are to blame.

Given her views perhaps we could give HMRC power to nail them (and their crooked advisers) to crosses (Spartacus style) along the M1. That will teach them not to pay up!!!!

As if I needed any more

Cynical_Templar | | Permalink

As if I needed any more evidence that HMRC are using the media circus on tax avoidance to sneak through draconian powers that they will use to their own ends, I saw an enquiry case last week where the taxpayers advisers had made a claim for the repayment of NIC in relation to expenses following the defeat of HMRC at the Court of Appeal.  The response from HMRC was that they did not accept that the CoA decision gave a binding precedent as it was too close to the FTT decision.  They then proceed to try and bully both the adviser and taxpayer by warning that they are looking for a new test case.  We can expect this to become a feature of HMRC's conduct