Reflections on “contractors schemes” and HMRC as “Judge, Jury, Executioner”


From gordo at  AccountingWeb (part of this discussion thread)

Understandably there is emotion on both sides.

We can’t blame the Accountants on here for standing their grounds. Many have very clearly said on a number of occasions that they would never have recommended such schemes and that they view them as highly abusive.

So if we don’t want the Accountants to label all Contractors the same then let’s not label all Accountants the same.

By the same token it is clear that some Contractors probably did get involved in order to minimise their tax liability. However others were potentially misguided, or mislead, but often they took advice from what they believed was a reliable source and they fully disclosed the matter on their Tax Returns (under advice from Accountant to prevent Discovery). So full Disclosure to HMRC who already had the schemes registered some years before and who got an Employers Annual Return every year with a list of employees.

We can’t blame all QC’s either. We don’t know what their remit was and besides it appears to me that what was advised did work as the law stood at that time. Let’s not forget that. Can’t sue somebody because HMRC introduce legislation that retrospectively impacts upon the planning done (assuming such caveats were given and if it’s a QC then you can bet they were).

What about the Promoters? Were they all a bunch of rogues? Well I can’t be sure of all and there are certainly some that I have researched on the internet that appear to be able to decide in 5 minutes whether it was the right strategy for your circumstance and who offer 90% return or more, so some may be rogues. However I can categorically say in my own experience that the ones I spoke to were definitely not rogues. Indeed, they were very specific on the warnings on risk and their analysis was impressive. The risk warnings came before the analysis and they also included all the risks of the alternatives, such as IR35.

Again, we cannot be certain which providers were careful with their warnings and which were not. So we can’t label all providers together. Neither can we be certain who understood the warnings, who ignored the warnings and who didn’t receive any warning. Certainly, I fully understood the warnings because as an Accountant myself, I understood (most of) the tax issues.

So the only thing I can think to do: legislate from this day forward to stop any new loans and litigate those historical schemes that HMRC see as abusive. (This is not what HMRC have done. Why?)

The case I posted overnight, which came from accountingweb, on company car tax, demonstrates that HMRC will use substance over form when it suits their purposes then ignore it and argue for a strict interpretation of the law when that suits their purposes. It also demonstrates HMRC will pursue tax in cases where there is patently no income and no benefit. HMRC didn’t just try it on, they actually took it all the way to the Court of Appeal. Who sanctioned that use of taxpayers money!

Behavioural Psychologists. Behavioural psychology has its roots in conditioning. Remember Pavlov’s dogs? The Behavioural Insights team’s strap line on Twitter
is ” encourage people to make better choices for themselves….Known as worlds first nudge unit. “, how insidious, better for whom and are the people aware of how they are being “encouraged” and for what purpose? Are we being conditioned, like Pavlov’s dogs, to accept Big Brother?
Can anybody tell me the definition of nudge?

There may well be a wide variation in the motives and the experiences of Contractors. I cannot be certain. I am pretty sure of what HMRC are up to, but again I cannot be absolutely 100% certain. I am broadly aware of HMRC resiling from agreements reached years ago, it would appear to be so that they can delay the day in Court (perhaps forever) and issue APN’s (Accelerated Payment Notice) demanding an Advance Payment that the Government then record as Income.

So I conclude that HMRC cannot be trusted to be judge, jury and executioner. Let’s us see this in Court and let the learned Judge(s) decide”