Do the government’s proposals to tackle high risk tax avoidance schemes represent a proportionate and fair response? Or will the results be sweeping new powers for HMRC to use and abuse, further eroding our rights under the UK’s existing draconian tax laws?For once, you’ll see this consultation document is aptly named: Raising the stakes on tax avoidance promises that government “will not tolerate” tax avoidance scheme promoters who don’t correctly advise their clients.
The position is somewhat ironic following the outcome of the Mehjoo case, where a tax adviser has been penalised for failing to advise a client correctly on tax avoidance options available. But the government clearly means business, and the Chartered Institute of Taxation’s (CIOT) broadly positive response to the proposals suggests that the tax and accountancy profession may not object wholesale to the proposed legislation.
That worries me, and it should worry you. Not because we’re likely to be promoting high-risk tax avoidance schemes any time soon, nor are you likely to be participating in one (at least, I’d hope not if you are an Accounts Direct client. There are many more practical and legitimate ways to save tax than participating in a high risk avoidance scheme).
It’s because HMRC once again wants the powers to be policeman, judge and jury for anyone the taxman considers to be operating in ways it does not like. Today, that means using a complex double taxation treaty or currency arbitrage schemes that serve no commercial purpose except to avoid paying tax. But tomorrow it is very likely to mean targeting company directors who pay low salaries and high dividends to legitimately avoid tax. Or HMRC could take against income splitting with a spouse, another completely legitimate tax avoidance route.
And let’s not forget that, no matter what the House of Commons’ Public Accounts Committee and its chair Margaret Hodge might believe in their breathtaking ignorance of the subject of taxation, tax avoidance is perfectly legal. It is tax evasion that is illegal, and it’s time our elected representatives educated themselves on this important distinction.So, do we care that an estimated 200 specialist tax advisers and scheme promoters may be named, shamed and possibly fined, and that a few thousand of the super wealthy will have to make adjustments to their tax returns and pay back taxes? That’s assuming they don’t do the sensible thing and adjust their schemes to circumvent all the measures the government has conveniently published in its consultation document.
No, not really.But am I concerned that HMRC will be given yet another shiny new tax legislation toy that it will be keen to play with, and probably abuse. After all, HMRC – one of the biggest bullies on the estate that is the UK’s creaking tax system – has proved itself to be a prodigious bully.
Yes, I am, and so should you be.There’s not much we can do about the proposed legislation apart from responding to the consultation and suggesting changes to curb potential future HMRC excesses. But what we can all do is make sure we keep our tax affairs in good order, so that if we do appear on HMRC’s radar, there is nothing that will give them a strong return signal to prompt an investigation.If you are at all worried about your current tax situation, you know where I am and I’d be delighted to take your call.