Advisers lead rearguard fight against avoidance rulesby
An alliance of tax advisers is urging accountants and business people to join their campaign against Draconian measures set out in last month’s Tackling marketed tax avoidance consultation document.
The campaigners argue that the profession is in danger of sleepwalking into a significant loss of tax rights by not challenging proposals that are being fast-tracked into the 2014 Finance Bill.
The consultation document published on 24 January undermined fundamental principles of British justice, argued Douglas Aitken, tax director at specialist consultancy Peak Performance.
“It’s far more fundamental than tackling nasty tax avoiders,” he told the audience at the 2020 spring conference in Coventry on Thursday.
“I urge you to read it. It’s like police stopping a blue car for speeding and deciding that every blue car has been speeding. Then saying, ‘Let’s go back for the last 10 years and assume every blue car was speeding and retrospectively apply a fine to them.’
“And there’s no right of appeal. That’s what’s coming in with that consultation document.”
Aitken argued that the proposals breached European human rights legislation by introducing retrospective tax legislation and denying any right of appeal. “It allows HMRC to be the judge, jury and executioner,” he said.
The specific concerns on rights raised by Aitken and advisers from EDF Tax and The Whitehouse Consultancy relate to:
- Accelerated payments that HMRC will be able to demand from taxpayers before any arguments have been heard before any tax court.
- The ability to issue a follower notice declaring that a taxpayer’s arrangements are “the same or similar to other cases” that have been defeated in court - with no right of appeal.
Experience has taught Aitken to view HMRC’s intentions with some scepticism. The consultation document suggested that HMRC could issue follower case notices based on an 80% success rate in court - but 90% of all cases don't even get to court, suggesting some form of settlement.
The case of the Rangers FC employer benefit trust was an example where if HMRC can overturn the tribunal decision, it could decide to issue follower notices to other cases, but the relevance to a well implemented EBT wouldn’t be there, Aitken said.
He has already seen a similar mindset emerge from the Boyle contractor case, which was extremely pooly implemented - but encouraged HMRC to write to many other contractors in similar scenarios.
Turning back to accelerated payments, he argued that the Declaration of Tax Avoidance Schemes (DOTAS) regime opened the door to less scrupulous scheme promoters. “For anyone who flies under the radar and doesn’t disclose, there’s no penalty.
“Providers who play by the rules and err on the side of caution get penalised. It won’t catch the fly-by-nights, but will get good schemes who do things properly.”
Aitken also told the 2020 meeting that the consultation document misled Parliament. “David Gauke wrote that the delays in settling tax avoidance cases are all down to scheme providers. That is rubbish.”
Delays are just as often caused by HMRC and its lack of resources. “If you pay up front, HMRC has no motive to wind up a case. So if something happened that was unfair, the client could wait for 10-15 years before HMRC turns around later and says, ‘You were right.’”
“Suggesting that HMRC needs these sweeping powers to address the issues at stake here is misleading. They actually have powers at the moment - they choose not to use them.”
In meetings with HMRC officials about the proposals, Aitken has challenged them to say what was or was not abuse or aggressive tax avoidance. “They couldn’t tell me. That’s the situation that we operating in. It’s an area of uncertainly caused by politicians whipping up hysteria because they’re trying to deflect attention.”
The document was published in the final week of self assessment season, and gave just a month for repsonses - an unreasonably short time for consultation on such important issues, Aitken argued.
Now that the submission deadline has passed, he and fellow campaigners are urging accountants and business people to lobby MPs, ministers and members of the Finance Bill committee to block the legislation. One accountant who wrote to their MP got a letter back agreeing to write to David Gauke objective to the retrospective nature of the proposals and lack of appeal rights.
“That underlines the value of making representations. If we do nothing, we’ll get what we deserve,” Aitken said. “If this thing comes in, there would be howls of protest - but they would be too late.”
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