From the Journals of Robert Maas
“I’m ashamed to admit it but I voted Conservative at the last general election. Fortunately most of my neighbours voted Labour so my vote didn’t matter. But I’m still embarrassed to have done so. Why? Because I am becoming increasingly tired of the Conservative government lying to me all the time. That may be a bit of an exaggeration as I do not have the breadth of knowledge to gauge that in non-tax matters. But I do know that they do so when it comes to tax. Lying may be a bit strong too. It may be that the government believe that once Margaret Thatcher abolished most of the grammar schools in the early 1970s, the standards of State education have plummeted to such an extent that the citizenry cannot cope with the truth. But I was a grammar school kid. The State educated me fairly well, so I don’t need protecting from facts.
This article has been prompted by an HMRC Technical note on what they call “disguised remuneration avoidance schemes. Let me make clear immediately that I have no problem with HMRC tackling tax avoidance schemes. I am delighted when they do so – albeit that my understanding of what is a tax avoidance scheme seems somewhat different to HMRC’s. HMRC tell me that “the government’s view is that these schemes don’t work”. The government is of course entitled to its view. It is also entitled to bring in legislation to reinforce its view. But what the document is largely talking about is Employment Benefit Trusts (EBTs). Whilst I do not wholly discount the possibility of the Cabinet agenda having included a discussion on whether or not EBTs “work”, I am a bit horrified if that is what happened, as there are enough strategic issues for the government to worry about without the collective Ministerial talent being diverted to considering the efficacy of historic tax arrangements. Of course I fully accept that David Gauke, who has ministerial responsibility for HMRC, may have himself immersed himself in the tax legislation and the detailed documentation of thousands of EBTs and formed his own conclusion that EBTs do not work. But even if he did so, his considered opinion is just that; it is his view, not that of the government. As a solicitor, he is capable of doing so, although whether such industry is a sensible use of his ministerial time and the high salary us taxpayers pay for his services is another question. But I think it is more likely to be HMRC’s view than the government’s. I would also make the point that, as far as I am aware, although HMRC have won a number of cases before the Courts and Tribunals, none of these have been on the basis that EBTs do not work, but rather than in those particular cases what actually happened did not reflect what the parties had intended. Accordingly HMRC’s view – or the government’s view if that is in fact the case – is not universally shared.
But it is not simply that view that concerns me
The document goes on to say, “the package of changes announced by the Chancellor at Budget 2016 will ensure that those who have used or continue to use a disguised remuneration tax avoidance scheme will pay tax and NIC on that remuneration as Parliament intended”.
Parliament in fact enacted legislation against disguised remuneration (which includes some payments by EBTs) in 2011, but only in relation to transactions undertaken after 8 December 2010. That suggests that Parliament has no view on disguised remuneration before that date. Yet the Budget announcements are mainly directed at pre 8 December 2010 EBTs, so it is wrong to pretend that those changes are in any way aimed at what Parliament intended.
So, if I am not a fan of EBT loan arrangements, and some, at least, of them, like that in Murray Group, do not avoid tax at all, why should I care if HMRC and/or the government lie to me and the rest of the citizenry in order to seek to persuade us that the Chancellor is right to attack such arrangements entered into pre 2011? Well, apart from the fact that I don’t like being lied to full stop, it is because the lies are to hide the fact that the Chancellor intends to introduce retrospective legislation to tax now (or rather in 2019) the loans that were made by EBTs before 2011. Parliament is normally violently opposed to retrospective legislation. It accordingly seems that by pretending that Parliament was opposed to such loans pre 2011, the Chancellor thinks that they will not realise how clearly retrospective his proposed legislation is. What the Chancellor is really saying is that if a person received a loan from an EBT before 8 December 2010, he should either voluntarily pay tax on the capital amount, even though it is probably not taxable at all under current laws, or he should repay the loan before 5 April 2019, and if he chooses to ignore both of these options and insist on exercising his legal rights under the loan agreement, then Parliament will introduce a new law to tax him in 2019 on money he received in a non-taxable form in 2001 or 2009, or even 1979. That is retrospection with a vengeance!“