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Budget 2021: HMRC given more powers

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HMRC has a new arsenal of powers to use against the tax avoidance industry, and has rewritten history with a retroactive power over discovery assessments. A new economic crime levy will apply to large accountancy firms.

27th Oct 2021
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Recent cases passing through the tribunals – most recently that of Jason Wilkes at the Upper Tribunal – have highlighted defects in the legislation concerning the High Income Child Benefit Charge (HICBC). As matters stood, HMRC had no legal right to collect sums due under HICBC using a discovery assessment under TMA1970 s29.

New provisions in the Finance Bill 2021-22 will enact – retroactively – that HMRC has in fact always had that power. This applies also to discovery assessments for Gift Aid, and to various of the pensions tax charges.

Taxpayers who had received HICBC discovery assessments which were appealed before 30 June 2021 on similar grounds to those discussed in Wilkes will not be affected by this: their appeals will be settled under current legislation. However, HMRC is appealing Wilkes to the Court of Appeal, so is clearly hopeful that current legislation may also be settled in its favour!

This whole exercise seems somewhat churlish and heavy-handed. HMRC already (for cases since 2017) has the alternative approach of a simple assessment under TMA 1970 s28H, which can achieve the same purposes, yet seems reluctant to use it.

HMRC will be speaking at AccountingWEB Live Expo. Register now to see their sessions on tax and MTD.

Prospectively, the Finance Bill will make it clear that HMRC can use discovery assessments to collect any income tax or capital gains tax which is due but not yet assessed, thus turning the s29 discovery assessment into the “anything assessment” which HMRC has always wanted it to be.

Clampdown on tax scheme promoters

The government has been consulting for some time on how to combat mass-market tax avoidance schemes; the Finance Bill 2021-22 will contain four measures which are intended to make life difficult or impossible for organisations to promote these schemes.

1. Freezing Orders

Under current law, HMRC can only apply for a freezing order on a company’s assets once there is an “existing cause of action” (such as an enforceable debt), by which time it may be too late to be effective. The new provisions will, for example, enable a freezing order to be sought at the same time as the initial application to the tribunal for a DOTAS penalty – thus denying scheme promoters any opportunity to frustrate the penalties by removing or concealing proceeds.

2. Offshore promoters

Additional powers are to be granted enabling a penalty of up to 100% of proceeds to be levied against UK entities fronting or facilitating avoidance schemes on behalf of a non-resident promoter (per paragraph 3, Schedule 33A of FA2014 as amended by FA2021). This would only apply where existing penalties (under DOTAS, POTAS or DASVOIT) exceed £100,000.

3.Winding-up

New provisions will enable a winding-up application to be made by HMRC on the ground that a company or partnership is “operating against the public interest” by operating tax avoidance schemes, but the final decision whether to wind up will still remain with the Court.

4. Naming and shaming

New provisions will allow HMRC to publish information about schemes and their promoters at a very early stage – as little as 30 days’ notice could be given to the promoters – in the hope that taxpayers might appreciate the risks of investing and be deterred from doing so.

This is potentially a very powerful tool. Prospective customers often join schemes because they are persuaded that they are uncontroversial and unlikely to face any serious HMRC opposition. Clear and early evidence of HMRC antagonism may well cause “cold feet” in such customers.

Economic Crime (AML) Levy

This will be charged from 2023 on entities which are regulated for AML purposes. This includes accountants, lawyers, estate agents and casinos, as well as banking and credit institutions.

The aim is to raise around £100 million a year to be used to combat economic crime. Entities with UK revenue below £10.2 million will be exempt from the levy, while those with UK revenue more than £1 billion will be expected to pay in the order of £250,000.

Replies (17)

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Stepurhan
By stepurhan
28th Oct 2021 08:39

More retroactive powers.

That is unjust. People have a right to know that the law as written at the time they do something is the law that applies. Even if people have made use of loopholes in the original law, that does not justify acting like the law has always been something different.

Essentially this is the government giving themselves free rein to enact poorly written legislation knowing that they can literally go back and change it.

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Replying to stepurhan:
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By Justin Bryant
28th Oct 2021 09:38

What, like the Loan Charge you mean, where I was more or less an loan (pun intended) voice here complaining of the retrospective effect (indeed it was worse than retrospective if you understand such things, as it went back 20 years, whereas normal retrospective legislation can only normally go back 4 years in practice due to limited DA time periods)?

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Replying to Justin Bryant:
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By RayM55
28th Oct 2021 09:47

That you re-writing history Justin and using my words?

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Replying to RayM55:
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By Justin Bryant
28th Oct 2021 15:58

Hardly. If you do a search of this website you will see that apart from Gordo (and possibly one or two others at most), I was more or less in a minority of one in complaining about the Loan Charge. See for example:

https://www.accountingweb.co.uk/tax/hmrc-policy/the-loan-charge-pantomime

https://www.accountingweb.co.uk/any-answers/hmrcs-latest-loan-charge-update

https://www.accountingweb.co.uk/tax/hmrc-policy/tax-barrister-throws-the...

https://www.accountingweb.co.uk/any-answers/loan-charge-review-has-been-...

I acknowledge that people like Keith Gordon agreed with me, but I was talking about (regular) contributors here.

I also made comments here to the effect that CIoT et al basically sat on their a*se re all that and basically washed their hands of the whole affair (despite all the suicides etc.), probably as they like to suck up to HMRC so much these days for fear of missing out on OBEs and so forth, so perhaps you're the one rewriting history?

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Replying to Justin Bryant:
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By RayM55
29th Oct 2021 11:50

Complete tosh, I had criticised the loan charge two years before Keith was even bothered about it including at the Treasury Committee in 2017 and you do realise that your description of it is almost word for word what I told the Parliamentarians.

So I suggest you get your facts straight, the CIOT and numerous members of the tax community have made representations to HM Treasury and HMRC, you are far from a lone voice.

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Replying to RayM55:
Stepurhan
By stepurhan
29th Oct 2021 14:43

RayM55 wrote:

Complete tosh, I had criticised the loan charge two years before Keith was even bothered about it including at the Treasury Committee in 2017 and you do realise that your description of it is almost word for word what I told the Parliamentarians.

So I suggest you get your facts straight, the CIOT and numerous members of the tax community have made representations to HM Treasury and HMRC, you are far from a lone voice.

Odd as it feels to defend Justin on this matter, he did say that he appeared to be the lone voice HERE.

You do not appear to have engaged in the repeated discussions on this subject in Any Answers. In fact, based on your profile, you have hardly engaged with Any Answers at all.

Perhaps you should read claims more carefully before unleashing a rant like this on another member.

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Replying to stepurhan:
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By RayM55
29th Oct 2021 17:19

What I put was not a “rant” but I assume in your world this was okay from Justin?

“I also made comments here to the effect that CIoT et al basically sat on their a*se re all that and basically washed their hands of the whole affair (despite all the suicides etc.), probably as they like to suck up to HMRC so much these days for fear of missing out on OBEs and so forth, so perhaps you're the one rewriting history?”

And you are right, I have not made comment here as I was busy commenting and pressing the issue where it might do some good.

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Replying to stepurhan:
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By RayM55
29th Oct 2021 17:19

What I put was not a “rant” but I assume in your world this was okay from Justin?

“I also made comments here to the effect that CIoT et al basically sat on their a*se re all that and basically washed their hands of the whole affair (despite all the suicides etc.), probably as they like to suck up to HMRC so much these days for fear of missing out on OBEs and so forth, so perhaps you're the one rewriting history?”

And you are right, I have not made comment here as I was busy commenting and pressing the issue where it might do some good.

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Replying to Justin Bryant:
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By RayM55
29th Oct 2021 11:50

Complete tosh, I had criticised the loan charge two years before Keith was even bothered about it including at the Treasury Committee in 2017 and you do realise that your description of it is almost word for word what I told the Parliamentarians.

So I suggest you get your facts straight, the CIOT and numerous members of the tax community have made representations to HM Treasury and HMRC, you are far from a lone voice.

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Replying to Justin Bryant:
Stepurhan
By stepurhan
28th Oct 2021 11:23

My recollection of the loan charge is that it was taxation of loans that weren't ever really loans (because there was never any intention of paying them back) and should have been treated as income all along. So it wasn't really retrospective legislation at all. It was dealing with a historical problem where income was falsely misdeclared.

I know this is a subject we won't ever agree on though.

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Replying to stepurhan:
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By Justin Bryant
28th Oct 2021 16:05

But you can perhaps agree it was worse than normal retrospective legislation for the above 4 year normal time limit reason for normal retrospective legislation, so to label it as merely retrospective is in fact not doing it justice!

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Replying to Justin Bryant:
Stepurhan
By stepurhan
28th Oct 2021 18:57

I don't think I can agree to that, since I have said that I don't see it as retrospective legislation at all. As I already said, I see it as income being falsely claimed to be loans, therefore taxable at the time the "loans" were taken out without the need for retrospection.

You're not going to change my mind on that and I'm clearly not going to change yours. Do you really want to go around in circles on this again?

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By RayM55
28th Oct 2021 09:51

This change reflects again a point I have made on numerous occasions, the TMA 1970 is not fit for purpose and must be brought into the 21st Century as a matter of urgency. Time and time again HMRC discover (pun intended) that the current law is defective having regard to the tax they are now responsible for. The need for this tinkering is on them.

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By RayM55
28th Oct 2021 09:51

This change reflects again a point I have made on numerous occasions, the TMA 1970 is not fit for purpose and must be brought into the 21st Century as a matter of urgency. Time and time again HMRC discover (pun intended) that the current law is defective having regard to the tax they are now responsible for. The need for this tinkering is on them.

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By AndrewV12
28th Oct 2021 12:33

Extract above
'Clampdown on tax scheme promoters
The government has been consulting for some time on how to combat mass-market tax avoidance schemes; the Finance Bill 2021-22 will contain four measures which are intended to make life difficult or impossible for organisations to promote these schemes.'

Alhelou about time.

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Replying to AndrewV12:
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By Hugo Fair
28th Oct 2021 12:58

Well ... let's just see the precise wording of the four measures in the Finance Bill 2021-22 before starting the celebrations.
Signed, Jeremiah.

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By richard thomas
29th Oct 2021 14:54

It is shocking but not surprising that HMRC justify the retrospective nature of this proposal by lying, but this is what they have done in both the OOTLAR and the TIIN.

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