Tax Director of WTT Consulting Ltd.
Specialist tax enquiry firm, with a strong presence in the contractor market
So we add another case to the growing list of those where HMRC have acted in an arrogant, bullying, unaccountable and morally, legally and ethically unacceptable manner.
This comes soon after their "seriously flawed" attempt to prosecute Zeus Partners over a film scheme (come on, 25 years after legislation allowing relief on film, 10 years after a series of "victories" in tax cases, HMRC still does not understand them?) - which is going to cost you and me millions in fees and compensation.
HMRC is out of control. They consider themselves unaccountable and if you have the temerity to insist that they follow the rule of law or treat you like they treat a multi national or even admit that their collection tactics are little more than strong arm intimidation, you are first branded as "difficult", then given a "take it or leave it" ultimatum or face more bullying, then forced into endless and expensive delay trying to get to Tribunal.
The House of Lords called for a powers review last year.
I think we need more.
I think we need a root and branch review of how HMRC has been corrupted from being a trusted and trustworthy organisation doing a difficult job, fairly, and now is seen (and acts and demonstrates at regular intervals) as a faceless, thoughtless, pernicious and vindictive pursuer of "maximum revenue".
Either successive Governments have forced HMRC into this situation via their policies - especially austerity - or a senior cabal of Civil Servants, with their eyes on the prize of that end of career gong - has taken HMRC into a downward spiral.
We need a Royal Commission and we need it fast.
I'm going to add one final thought before stepping away as this debate has once again polarised into those who claim "you must have known" and those who claim "we were duped".
Because of this, the debate is going in circles.
Are loans repayable? Yes. Are we seeing lenders ask for repayment? Yes.
Will repayment make any difference to HMRC? No.
So HMRC say, "the loans are not real = pay tax". They also say "even if the loans are real = pay tax".
If they think this now - and they tell us that this has "always" been the case - why did they not say so in 2003?
We're not in a playground where name calling counts for anything.
We're dealing with real people who stand to lose EVERYTHING because of what was, in the vast majority of instances, a genuine mistake.
They will lose financial security, family, relationships, careers and in some cases their lives.
If you are prepared to write them all off on the basis of a discussion with one clearly deaf accountant I suggest your sense of balance needs adjusting.
This is my last exchange with you as I'll never convince you of anything you have not already decided.
Looking back over previous visits to this subject I see that you have a very purist view and automatically brand any user of such a scheme as doing so knowingly and with malice aforethought.
This despite others in the past advising you of their circumstances in which they took part. Clearly you are unimpressed with their tales, many of which I can verify.
So be it.
Just remember that it's sometimes difficult to see the mud of real life from the top of an ivory tower.
You are entitled to a view and yes I have a firm that assists contractors.
I ask you to however consider the report and not my motives.
The report has found that HMRC has conducted a cynical campaign against a group of taxpayers in order to cover up their own failings.
You may not like the fact that the group of taxpayers targeted happen to be my clients, but as they are I'll not apologise for taking every opportunity to defend them.
I would expect a professional adviser to do the same if this sort of blatantly vindictive and potentially unlawful action was taken against their client group.
I understand that you are trying to link a commercial motive with a perhaps false indignation and thereby reduce the effect of whatever I say here but in this instance I have to observe that you do yourself no favours as any reasonably competent professional surely cannot ignore the findings?
I think tax is due on those earnings.
That situation is what HMRC claim has "always" been the case but have been unable to produce any legislation to support. They do have a case (Rangers) which says tax is due and it's due from the employer.
HMRC has been unable to support its case but insists that they told everybody this in 2004. This report says that they did not do so adequately and that they had ample opportunity to change the law and did not.
So, if contractors knew the tax was due because HMRC and the law said so, would they have used these schemes?
Some would have done. I can say with confidence that 90% of more would not have done.
It's also a long stretch to justify the multiple failings of HMRC and HMT by saying tax should have been due.
If tomorrow HMRC decides that every cup of coffee you bought should come with a £1 tax, here's a bunch of misleading statistics and misinformation to support that and a high pressure collection approach to go with it, does that make their actions right?
1. Never used this or indeed any other tax scheme (unless you count a pension?)
2. Never promoted a loan scheme.
I will declare that I worked in a "tax house" which did film schemes and other arrangements. Our "customers" were IFAs because they were authorised to speak with individual clients and we were not. Just how difficult would it have been to have repeated that arrangement with contractors?
Instead we see a multi billion pound industry with absolutely no regulation.
Whose fault is that? Politicians. Is that in the report here? Absolutely not.
Some interesting points above and I wonder if it speaks to a deeper problem.
Many of my clients relied upon the "expert" advice of people connected to the scheme. Often those people had no professional qualifications and should therefore have been approached with some caution.
However a significant minority had "advice" from ICAEW/ACCA/CIOT members which validated the scheme, often without adequate risk warnings. Some even took the scheme offered to an "independent" accountant, who without disclosing often close links with the promoter, gave the scheme a clean bill of health.
I have in the past been criticised for painting all advisers with the same brush and saying that they should never have opined on these schemes without disclosing connections and risks. That is clearly incorrect because many advisers have not seen these schemes and many have advised clients to stay away.
There are however advisers in the past and indeed advisers who today are saying that schemes to pay contractors or worse - to avoid the loan charge - are perfectly acceptable and relatively risk free. I can produce a portfolio of half a dozen loan charge avoidance plans at least two of which have very strong connections with professionally qualified people.
Any professional code of ethics is only as strong as the weakest member. However, without some policing of such a code, the race to the bottom is unchecked.
Yes, HMRC has erred here. Yes, contractors have erred here. However the institutes and their members are not entirely blameless.
With respect, that is a shockingly naive statement that is not borne out by the facts laid out in the report.
The report is "excoriating". It calls for a root and branch review of HMRC and its relationship with its oversight. As will be obvious to all, having your major beneficiary and the party responsible for oversight as the same entity, is hardly a recipe for objectivity and integrity.
Anticipating the usual nonsense we see here and elsewhere about "greedy contractors, avoiding tax" and therefore deserving all they get, just be aware that the report considers the manner in which this crisis arose.
It says that HMRC failed in its primary duty to identify and prevent the sort of schemes now classed as avoidance, despite having all the data they needed.
It says that HMRC failed to make its position clear and failed to take action against the employers and promoters. (In February this year HMRC has permitted a major player, based in the UK, to be struck off with no claim being made against them).
It says that HMRC, faced with exposure of its shabby performance, came up with a retrospective tax charge to cover its blushes.
It says, damningly, that senior HMRC officials allowed all of this to happen and supported it with research and statistics that were inadequate or incomplete.
It says that senior HMRC officers may have breached the Civil Service Code and should be identified an disciplined.
If all of the above is correct - and I can say from the evidence of individual client enquiries, I very much fear it is - the HMRC had the opportunity in around 2004/05 to stop all of this happening - and did not. What started as incompetence worsened perhaps by lack of resources, meant that it later required a "cynical" campaign of misinformation and misleading Parliament.
I'm sure we will see messages here saying fault lies at the feet of contractors. It does. (Not because as the article says they used a scheme to avoid tax but because they put finding and securing a job over and above all other considerations). However all of my clients would have stopped in 2004/05 had HMRC been on their game.
They were not. Worse, having fallen behind in the game, they now attempt to change the rules by misleading the referee.