PAC: Tax schemers ‘run rings’ around HMRC

Kashflow logo
Share this content

HMRC has come under fire again from the House of Commons Public Accounts Committee for failing to block tax avoidance schemes worth billions of pounds.

In what is becoming an almost weekly ritual, PAC chair Margaret Hodge grabbed headlines by lambasting the tax department, this time for its dozy response to tax scheme devisers who are draining more than £5bn away from the Exchequer a year.

Hodge sourced the £5bn figure from a recent NAO report on HMRC’s efforts to tackle marketed avoidance schemes, which also estimated a backlog of 41,000 cases meant that up to £10.2bn could be at stake.

The PAC report also draws on written evidence presented to the committee and oral evidence presented in December from HMRC officials, account...

Please Login or Register to read the full article

The full article is available to registered members only. To read the rest of this article you’ll need to login or register. Registration is FREE and allows you to view all content, ask questions, comment and much more.

About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and


Please login or register to join the discussion.

19th Feb 2013 17:03

If anyone ever...

... needs a witch hunt conducted, the PAC chairman is definitely your girl!

It's scrutiny with a foregone conclusion.

Thanks (9)
19th Feb 2013 17:31

Spot on, though


When the government brings forward tax incentives to stimulate economic activity, tax avoidance specialists get to work on creating and marketing new schemes to exploit them. Promoters collect their fees even when the schemes are found not to deliver a tax advantage, the PAC noted.

“It is a game of cat and mouse and HMRC is losing,” commented Hodge.

“The number of cases HMRC takes to court is tiny compared to the overall caseload. It must make use of the additional resources it has been given to act much more urgently to investigate and close down new schemes and to bring more cases to court.”

I agree with the comments above. I just hope it isn't all hot air, and the PAC can, and will, make a difference.

Thanks (0)
19th Feb 2013 17:31

ISA Girl

I do hope that Margaret Hodge has no ISA to (not) declare on her Tax Return.

It would be awful to think that she has avoided any tax however gently and lawfully done because it does deprive the government of funds for schools and hospitals you know.


Thanks (9)
By markfd
to Cheshire
20th Feb 2013 06:48

Err, think you've forgotten...

Andrew288 wrote:

I do hope that Margaret Hodge has no ISA to (not) declare on her Tax Return.

It would be awful to think that she has avoided any tax however gently and lawfully done because it does deprive the government of funds for schools and hospitals you know.



...the several billion of Oppenheimer holdings through "family trusts".  And the parent company based in Zug.  Hodge's own avoidance is industrial scale stuff, not just a little ISA holding here or there.

Thanks (6)
to johngroganjga
21st Feb 2013 17:04

Not entirely forgotten

I was aware of the Oppenheimer trusts.  I was giving the blessed Margaret the benefit of the doubt in that she may not have had sole control of them whereas with the ISA it is all down to her and she does seem keen to make a number of comments appear quite personal. 

Thanks (0)
19th Feb 2013 17:50

Better the devil you know ....

If we wait for a 'pure in mind, and pure at heart' politician to start the ball rolling .... we will be waiting forever!

Thanks (0)
By markfd
20th Feb 2013 00:01

And herein lies the problem...

"When the government brings forward tax incentives to stimulate economic activity, tax avoidance specialists get to work on creating and marketing new schemes to exploit them. "


Government incentives to stimulate economic activity - how about just cutting taxes all round and not trying to manipulate individual parts of the economy.  The fallacy is in what they are doing, not people's response to it.

Thanks (6)
20th Feb 2013 11:42

HMRC in on the Act

I attend a presentation by senior HMRC employees recently.  I quote verbatim from one "I wouldn't mind if my tax bill went down by half"! Everyone wants to pay less tax and it all boils down to what the view of the day is on avoidance. Lets see senior government employees say why they have claimed PPR tax relief (especially as most seemed to flip on their second homes), when they don't have to, are they really paying the maximum amount of tax possible?!?!? Nice to see the popularist lobby from the man in the street, quieten down on tax AVOIDANCE, when they realised all those cosy chats of "lets avoid the VAT by paying cash" which of course is EVASION. Hodge simply doesnt understand and is playing out a personal and party agenda to the masses.

Thanks (3)
20th Feb 2013 12:10

It is our Duty to avoid, and HMRCs to Tax

The most widely stated case concerning the right to avoid tax is Ayrshire Pullman Motor Services and Ritchie v Inland Revenue Commissioners (1929 14 TC 754), from which this famous quote derives:

“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow — and quite rightly — to take every advantage that is open to it under the Taxing Statutes for depleting the taxpayer’s pocket.”

Later cases redefined some of the points, but still left intact the right to honestly organise tax affairs to a taxpayer’s financial benefit – specifically in the case of Inland Revenue Commissioners v The Duke of Westminster (1936 19 TC 490), which held: “Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be.”

Thanks (5)
to lionofludesch
20th Feb 2013 13:56

Reply to Nekillim

But every man is not so "entitled". As a working class man on PAYE, I have to pay my taxes. I cannot afford to pay some City lawyer. Let's just call this tax avoidance lark what it is - more privilieges to the wealthy at the expense of the British working class. Oh and the world has moved on a bit since 1936, doncha know! The serious schemes are using secrecy jurisdictions where it is impossible to know what is really going on and if they are legal or not.

Thanks (2)
20th Feb 2013 12:14

Wish they would quit talking and get it on.

Have Barclays done a deal I wonder?

Would not be surprised if there were a few backhanders given that these were common practice in other government services.

I think HMRC may well be behind the times. Criminals have always had policemen on the payroll why should HMRC be any different?

Thanks (0)
20th Feb 2013 12:21

High Taxes

Breed avoidance.  Complicated tax systems breed loopholes.  Politicians are responsible for allowing those rules to pass through Parliament.  Labour through Gordon Brown produced more tweaks and twists and turns in the legislation then anyone else in history.

It's not surprising many high earners take the opportunity to reduce their tax bills- when a debt ridden over spending Government wants to take over half of the money you earn after working all the hours under the sun (and moon), many are not happy about it.

The way to tackle tax avoidance is to lower the top rates (remember when 'fairness' meant the same for everyone, not 'earn more pay hugely more'), and simplify the system.  Then bring in a GAAR, and enforce it against large companies first and work your way down the system.



Thanks (1)
20th Feb 2013 12:36


At the end of the day the HMRC have no power to legislate.  Tax avoidance occurs because of legal loopholes.  It is parliament that needs to get a grip.  In Australia they have a system where any tax avoidance scheme has to be approved before it is marketed.  Here avoidance schemes can be marketed before they are approved or shut down and with such a backlog that looks like it will never happen. 


Another simple problem is a technical/legal one. Many schemes rely on the lending of money. So when is a loan not a loan?  It is virtually impossible to say " I can prove that you will never repay that money  therefore it is income."  It is drafted as a loan with no fixed repayment date etc etc etc.  Technically it is still a loan but in reality it isnt.


Thanks (3)
By Red1960
20th Feb 2013 12:52



Partisan politics aside Hodge's comments are inarguable.

We still have to be provided with a complete explanation as to why HMRC are failing to address tax avoidance and evasion issues to the full or making adequate use of the legislative powers and resources avilable to them.

This needs to be considered in detail particularly in view of the cozy relationships individuals like Dave Hartnett apparently enjoyed with some of those for whom who he was responsible for reaching what appear to have been "questionable" settlements against the interests of taxpayers.

One has to wonder whether once the issue has been the subject of proper scrutiny (which it has yet to be) criminal proceedings will or should ensue on both sides of the fence.

Something is most decidedly not right.

Tax should not be optional for the wealthy and consequently well advised whilst being compulsory for the man in the street. That is a genuinely rotten borough likely to have serious consequences for the ethical and moral authority of all aspects of government in the UK.

Once that is gone "law" ceases to have any real meaning since the only real question any person might reasonably ask in relation to it is not whether an action is lawful but whether it will be held to account and how best that might be avoided: it legitimises criminal activity.

This is not an issue which can reasonalby be swept under the carpet dishonestly in the name of the self interest of clients by the profession unless it is prepared to be publicly regarded as little better than a haven for common thieves which in some quarters it undoubtedly already is.


Thanks (5)
20th Feb 2013 12:56

never ending loans

That's the bit I don't quite get (not being involved with such schemes so missing bits)

surely this is flawed by:

Substance over form? looks like an elephant? No employee would work for free if I gave them a loan instead? If so all well and good I'll be a b*** and claim it back when they leave.

Ramsay - The only or main reason this transaction was entered into was for the avoidance of tax Where was the commercial reality.

Thanks (4)
20th Feb 2013 14:10

We need a union


 Read the letter page in this morning's time, regarding the home secretary's blast off against the judiciary and their response.

 Yes, tax avoidance planners are making hay with deficient legislation. But they did not write it.

 Our members of parliament jointly and severally, and negligently avoid proper supervision of the tax rule making process.

 I understand this. If they get it correct no-one will notice, if they get wrong no-one will forget., So Joe Bloggs MP reasonably  says to himself-"Why stick my neck out?"

 What I do not like, and find hard to tolerate is that our trade unions, ICAEW and ACCA- are not shouting from the rooftops

"The law is the law" -that is it.

 Instead these two organsations being large organisations are more concerend with remaining "Friends" with other large organisations notably HMRC and HMG. and bugger[***] the peasants.

HMRC are happy to play this game because it detracts from the truth- that they themselves are finding it increasingly difficult to deal with dysfunctional legislation.

 Why are we still playing with this "Working together" nonsense?

If HMRC want to quietly go along with this political point scoring at our expense, then tell HMRC go away. I am not coming to tea with you to be insulted.

This is a long winding road to hell, But it leads to,( | remember), in a certain country, when my client's friend did not want to pay what the tax inspector wanted him to pay, the tax inspector simply pulled out a gun and shot him.

 There are nowadays sufficient of us in the profession who have first hand or family knowledge of countries not blessed with the UK's sense of corporate honesty. well able to inform HMG of what happens once you go down the road to "Pay what I think you should pay" and not what the law says. Ask the Russians, Greeks, Italian, not to mention Uganda, Kenya and Zimbabwe.

So Ms Hodge shut up and clean up your own house.









Thanks (3)
20th Feb 2013 14:40

I agree we are poorly represented and I for one would like our voice to be heard....Not because we have a vested interest but because we believe in the spirit of independence have professional integrity and above all know what we are talking about and what is best for the economy.

Whilst accountants may be involved in these schemes most seem to be banks, and other offshore institutions etc that do not have accountancy badges which enable them to by pass professional rules regarding fees and best advice that would stop the reputable amongst us.

I wonder how many accountants have accounted to their clients for the commissions received for these schemes and where they sit from a P.I. point of view if they have billed for advice in connection with said schemes?

Be interesting from a penalty point of view what the difference between selling and advice is. and whether the client did take reasonable care by asking the advice of someone independent and not involved in selling the product.

Thanks (1)
20th Feb 2013 14:45

More to the point


I wonder how many of us, similar to myself, have clients who deliberately restrict their earning so as not to get involved with the tax system.

 I have a number of clients who simply stop each year, in order to avoid falling into VAT and or employing assistance.

Does Ms Hodge consider this tax avoidance?


You think this is a joke-

A few years ago I had a case where HMRC argued that because my (PAYE inc.commission) client's earnings were well above contracted on target earnings needed to keep his employment-

Expenses necessary to attract that proportion of earnings above the OTE level were not allowable, according to the "wholly and exclusively, necessary" rules. On thr grounds that said earnings were not necessary for my client to keep his employment.

Two inspectors travelled from Manchester to Essex to spend a day arguing the point, and quoting case law.

And according to the "Law" they were correct. It was only a threat to go public on this obvious nonsense that closed the case down.

But HMRC never actually conceded the point. The amount of tax involved? less than £2,000.









Thanks (1)
20th Feb 2013 14:50

Tax Avoidance - Human nature - Governments - Politics

Things to consider: -

1. We all want something for nothing.  We want great public services and we want to pay less tax.  No one can deliver this, especially governments.

2. We all want our tax system to be fair.  We all want a simple tax system. Simple systems have winners and losers, just look at the Child benefit proposals.  Taxation / incentive scheme rules become complex to increase fairness.  With complexity comes opportunity and tax accountants who search for loopholes and such very lucratively.


Quantum theory tells us that when we measure something we affect that which is being measured.  This is also true of taxation (in fact it is true of everything to some degree).  Government must balance economic fact and necessity with political acceptability two very uncomfortable bed mates.

4. Multinational companies are in a position to use their ability to move locations as a stick to beat our government.  Employment or more accurately unemployment numbers carry enormous political weight so government has to again balance threats to leave the UK and make thousands unemployed with corporation tax avoidance.  The economic calculation may not be that complex but the political one is near impossible.

5. A very large percentage of the voting population will agree that the issues and choices facing government are beyond their understanding.

Having taken the above points into consideration is it fair to say that Margaret Hodge’s comments are pure politics.  The HMRC is an easy target but ultimately a self damaging one as it is the servant of government!  Margaret Hodge is only storing up future trouble for her own party as she is creating political ammunition for the opposition.

Government needs to take action that will create stability, administrative efficiency and economically sound solutions; political considerations should not be allowed to dominate.  We all know this is not going to happen.

Thanks (2)
By Robbas
20th Feb 2013 14:58

Own House

What a pity Hodge doesn't concentrate more on getting her own house in order. Fraudulent expenses claims cleared as acceptable by unaccountable civil servants, heads of bodies authorising tax payers money to be used for gagging orders, other heads paying off people who presided over cover ups and councils up and down the country wasting money left, right and centre. The Civil Service writes the legislation it's upto them to make it watertight and do what it's supposed to do. It's always earier to blame someone else ...........

Thanks (0)
By Red1960
20th Feb 2013 15:49




Yes and to be blunt more bent accountants than I care to count from the top of the profession to the bottom.

Like you said... it's always easier to blame somebody else but do carry on tilting at windmills or benefit claimants or immigrants or racial or ethnic minorities or whatever the latest press boogie man is.

It is far easier and more comfortable than opening your eyes.

Hodge is really not the issue here... that will save for another day.

The real point is that the case she is putting has merit regardless of who is actually putting it.

Do you really want to say it can't be true because Margaret Hodge is putting it regardless of the facts?


Thanks (3)
to andy.partridge
21st Feb 2013 11:05

What case?

Red1960 wrote:

The real point is that the case she is putting has merit regardless of who is actually putting it.

Do you really want to say it can't be true because Margaret Hodge is putting it regardless of the facts?

What case? All Ms Hodge has done is make unverified assertions that she has signally failed to support with facts. Since she is (evidently) doing this from a position of near total ignorance of the tax rules which apply in this country, and has flatly refused to listen to any evidence which does not support her wild conjectures, I don't think you can really dignify what she is doing by calling it a 'case'. All she is doing is seeking to make political capital, to further her own career.

There are undoubtedly problems with the current system, and we do need to do something, but (as was put far more eloquently above), you can have a simple tax system, or you can have a fair tax system. What you cannot have is both.

Please don't make the mistake of thinking the PAC are crusaders for justice: they are as cynical and self-serving as any other politicians, and will espouse whatever causes they think will garner the most votes.

Thanks (1)
20th Feb 2013 16:58


Government are guilty of inventing some unenforceable rules and then blaming the enforcers for not being able to enforce them. The longer they tinker with the tax system, rather than overhaul it, the worse it will get. Unfortunately, most politicians know what they need to do to fix the system, but they also know that it wouldn't get them voted back in again.

Thanks (3)
20th Feb 2013 20:41

Tax avoidance

Put simply, there is virtually no effort whatsoever to undo the effects of aggressive tax avoidance and I frankly think that the Public Accounts Committee  is yet another device containing smoke and mirrors. If HMRC really wanted to do something about it, they would but they have sacked most people that could have done anything about anything - people with knowledge and expertise who have long since left and gone into the private sector. What you have therefore are the industrial tax avooidance engines, such as Barclays, et al, which have now been shut down.


I also blame Parliament, which is not doing anything to stop industrial scale tax avoidance. Either find people who are going to really do something about this plague of immorality, or let's shut up about it altogether. The PAC are making good copy on this but it is only good copy. Let's look as if we are doing something is the mantra. Underneath all that bravado they are doing Jack.

Thanks (1)
21st Feb 2013 15:17

Margaret Hodge

It's all very well, the public accounts committee calling senior executives in to castigate them over their tax avoidance strategies.

However, this all falls into disarray when the MP leading the charge is the right honourable member for Stemcor Ltd.

I suggest that if Ms. Hodge is looking for avoidance, she would do well to look in the mirror and deal with the tax avoidance she finds there first.

As always with MP's it is "Do as I say, not as I do", This is why I have nothing but contempt for them.

Thanks (2)
By markfd
24th Feb 2013 07:26

I'm sure you are right... that she didn't set them up herself, but I do find the hypocrisy nauseating when she and her family are benefiting from just as aggressive tax avoidance as those she is criticising.  Not forgetting Milliband, Umunna (?) and others who've benefited from inheritance tax "planning".

Thanks (1)
By ds
25th Feb 2013 12:44

Red lights

Just as red traffic signals are taken as advisory by some car drivers, taxation seems to be optional for those that know the rat runs and short cuts.

Thanks (1)