Tag Archives: HMRC

Does HMRC have something to hide in relation to their settlement statistics?

By Gordon Berry

“Am I the only person to have noticed that HMRC has not issued any updates in relation to their settlement statistics for many months?

Since 27 March 2019, we’ve not heard anything. Does that not seem strange to you?

Well it certainly seems strange and concerning to me, particularly in the context of apparently conflicting and misleading information given to the Treasury Committee and Lords Economic Committee by senior HMRC officials.

For that reason, I decided to file a Freedom of Information Request to find out the correct up-to-date figures. After all, as a taxpayer I am entitled to these. Or so I thought.

Once we were beyond 5th April 2019, and that deadline had passed,  I submitted a Freedom of information request to ask HMRC some simple questions on the statistics:

  1. How many individuals (not corporates) registered for settlement?
  2. How many calculations have been issued by HMRC to individuals (not corporates)?
  3. What is the average of those calculations issued to individuals (not corporates)?
  4. Of those issued to individuals , how many signed settlement agreement offers have actually been returned to HMRC?
  5. What is the average value of offers at question 4 above?

As you can read from above, this is fairly straightforward and should present no difficulties:

Here is the answer I received: FOI (Freedom of Information) request

So basically, the answer is that they don’t want to release the information because they intend to issue it and put their own spin on it at a later date, possibly in their annual report – however, can we trust them to provide the information that I asked for?

I think the overwhelming answer is NO. Based on everything that’s happened so far with regard to settlement statistics. It’s either incompetence or deliberate misinformation – or combination of the two.

After all, HMRC is still largely using the same information and statistics which they quoted to the Lords economic committee in October 2018. 

Let’s just look at the evidence and why there is reason to be concerned about the statistics provided by HMRC:

WHAT HAS HMRC PROMISED?

At the Lords Economics Affairs sub-committee hearing in October 2018 HMRC’s  Ruth Stanier OBE gave oral evidence on the number of people who had already settled with HMRC with regard to what is now labelled DR Loan Schemes and a breakdown of who has suffered the charge. Ms Stanier was asked to follow this up in writing which she did on 31 October 2018 confirming that:

  •  To date, over 24,000 scheme users have registered”.
  • She also made a commitment to Lord Forsyth that HMRC ”are prioritising issuing settlement calculations to give clarity to those who gave us (HMRC) the information by 30th September 2018.” “We have committed to respond by 30th November 2018”

This all sounds very encouraging – until, that is, we look at the situation as at today’s date. Why’s that?

WHAT HAS HMRC DELIVERED?

Well, we know for a fact that as of today despite HMRC promise to their Lordships, HMRC have still not issued calculations to people who registered before 30th September 2018. In fact, based on information that we have, people who registered for settlement in the first quarter of 2018 have still not heard or seen anything!.

This is not in dispute and many thousands of concerned taxpayers are rightly apoplectic with worry over the continued uncertainty.

As if this was not sufficient cause for concern, there are many more issues about which to be concerned.

In the same submission to the Lords Economic Committee, Ms Stanier OBE went on to say that

“Budget & Autumn Statements 2016 documents show the expected yield from this measure to be £3.2bn by 2020-21, with 75% of that yield coming from employers. Our records show that, of those who have settled their case so far, around a quarter are from employers, and they account for 90% of the recorded yield”.

We were already familiar with this reference to £3.2bn yield from the original HMRC ‘impact assessment’ in 2016 and our suspicions were immediately raised.

I will go on to explain why.

That same impact assessment from 2016 had indicated that around 40,000 individuals might be involved.

Our suspicions were raised because we could see that the statistics are not much different from the statistics given in the letter from HMRC Chief executive Jon Thomson (subsequently knighted in January 2019) in his letter to the MP of June 2018.

In that letter Mr Thomson states  “Since 2016, we have agreed settlement with over 5,000 individuals and employers, raising over £500 million for the Exchequer. A further 20,000 people have contacted us to register an interest in settling.” That is the same letter in which Mr Thomson HMRC CEO says “The Loan Charge has also supported our efforts to settle DR cases without the need to litigate.”

Lord Forsyth asked Ms Stanier, in his letter of 1st November 2018, for a better understanding of the distribution of the 5,000 who had settled at that point. Ms Stanier responded on 5th November 2018 with a table indicating that:

There had been 5,000 settlements as at November 2018
Around 25% were from employers and 75% from employees
Around 90% of the yield came from employers and 10% of the yield came from employees.

Let’s just try to look at this information objectively:

  • It struck us that the most likely scenario was that those individuals who had settled by that point were likely those who had relatively small amounts to settle and therefore could manage to do so.
  • The idea that the average settlement for individuals was £23,000 seemed to confirm our belief that those who had settled were likely those with settlements at the smallest end of the scale
  • We would have expected that the average was probably closer to £100,000 and that for most people settlement was going to be at best a struggle and for many, nigh on impossible
  • We also noted that saying that 75% of the yield came from employers was only part of the story as those employers had a right of restitution against the employees, so whatever way you cut it, the employee will be liable for the tax on what they received

HMRC’s WORKED EXAMPLE

In a further letter dated 19th November 2018 Ms Stanier gave, in evidence to their Lordships  a worked example of a “typical settlement where the tax due is over £30,000”.

Ms Stanier’s ‘typical example’ is rather surprising in that the individual apparently had average loans of only £33,400 every year for four years and somehow that  individual then had sufficient funds to pay the settlement of £44,736.87 within 30 days (so no forward interest).

That just doesn’t smell to us like a ‘typical example’! Were HMRC prepared to mislead their Lordships?

What came next was equally as surprising.In oral evidence given to the House of Commons Treasury Committee on 30th January 2019 the HMRC witnesses of Jim Harra and Mary Aiston made some surprising statements. Remember HMRC initially set a deadline for people to ‘come forward’ of 31 May 2018, which they then revised to asking people to email HMRC by 30th September 2018 to register an interest in settlement and they were instructed to provide some specific information. Ms Stanier had promised the Lords that HMRC would then respond with calculations by 30th November 2018.

HMRC EVIDENCE TO THE COMMONS TREASURY COMMITTEE

Jim Harra referred in his evidence to 50,000 open cases and accused the taxpayers of not making full disclosure, whilst also claiming to have opened enquiries in most cases.

He said

We believe that the proposition we have put forward (he means the Loan Charge) is a reasonable and fair way of bringing disguised remuneration avoidance to an end and resolving the open cases in a way that is quick and efficient for everyone concerned.”

I think when Mr Harra says for everyone concerned, he actually means for everyone at HMRC. Mr Harra is the second permanent Secretary and Tax assurance Commissioner, so he perfectly well knows that that was not what parliament laid down in legislation as being fair to the taxpayer.

It’s Mary Aiston’s comments on 30th January 2019 on the statistics that is of most interest here, she said

We have settled about 6,000 cases bringing in about £1 billion worth of tax.” There are about 50,000 people. There are a lot more to go. In terms of getting calculations to people, we have issued 9,000 (Ms Stanier said in November over 24,000 registered and we will issue all calculations by 30th November 2018) and 7,000 of those are still to come back.”.

Ms Aiston also says “We think that the typical settlement that an individual is facing is somewhere in the order of £13,000.”. What! Well its transpired later under questioning I think from Baroness Kramer, that the new figure given by HMRC of a ‘typical settlement’ of £13,000 was actually the median figure and not the mean. Why would HMRC use the median figure?

Something doesn’t smell right. We were minded of tax barrister Keith Gordon’s earlier comments in his evidence about not trusting anything that HMRC say. Are HMRC seeking to misdirect the MP members of the House of Commons Treasury Committee?

Throughout all of this, The Financial Secretary to the Treasury Mel Stride was repeatedly using the same statistics as HMRC. Also HM Treasury were publishing the same and responding to newspaper articles with similar statistics.

Jim Harra used these practiced lines in his letter of 24th January 2019 (misdated as 2018) to the Chair Nicky Morgan when he said “The overall policy is estimated to raise £3.2 billion, 75% of the estimated amount is expected from employers.”, but he avoided the real questions from Nicky Morgan which was about how much of the Loan Charge would come from employees.

Why haven’t HMRC issued more up to date statistics?

Surely if their programme to force people into settlement was working then they would be happy to shout about the success rate?

MPs START TO TAKE NOTICE

We had by this time started to communicate our suspicions in regard to these practiced lines from HMRC in regard to statistics and MPs were starting to take notice;

Our point is that the Loan Charge is only needed by HMRC to allow them to get to employees. So if HMRC total figure is £3.2bn and HMRC estimate that only 25% is to come from employees, then all this heartache and debacle is for the sake of collecting £0.8bn or less

So this whole carry-on, HMRC retrospective charge, HMRC making a change to the legislation on 22nd November 2017 to get around the decision of the Supreme Court, suicides and mental health impact, was all for the sake of £0.8bn.

Indeed Keith Gordon has pointed out to me that the £3.2bn refers to the whole policy of settlement over the last 5 years so actually the figure is probably less than £0.8bn. Interestingly HMRC have also refused attempts to clarify what they mean by ‘employers’.

Many on social media and indeed many MPs apparently read this as Promoters, but we think it means those corporates who did full EBTs and it may also include those who did the Director variant of contractor schemes.

HM TREASURY’S (WHITEWASH) REPORT – MARCH 2019

Then on 26th March 2019 HM Treasury published its report.  Surely this would have more up to date statistics

Yes it did!

It said:

  • The policy was estimated to yield £3.2 billion over 5 years (unchanged)
  • HMRC has agreed around 6,000 settlements worth over £1 billion (unchanged)
  • 26,692 scheme users have registered an interest to settle (pretty specific and barely changed)
  • Of these 20,004 have returned their settlement pack
  • HMRC has issued settlement calculations to 15,649 users

Out of HMRC original estimates of 40,000 to 50,000 who need to ‘come forward’ this sounds to us like an unmitigated disaster.

The Loan Charge was due to come into charge at 5th April 2019 but still only 15,692 calculations have been issued. Plus only 6,000 settlements agreed! That is the same figure as that given on 30 January 2019 when evidence was given to the House of Commons Treasury Committee and almost unchanged from Jon Thomson’s letter to an MP which was dated 28th June 2018

JUST WHAT IS THE TRUE POSITION?

Of course, the truth is we just don’t really know!

However, as an eternal optimist, taking a leaf out of HMRC’s book,  I decided that I wanted to put this ‘beyond doubt’ and I waited until after 5th April to submit a FOI request to HMRC and establish the up to date statistics which I outlined at the beginning of this email.

As you know, from the reply I received, my request failed miserably.

Against the questions I put, you’ll see that I have highlighted the reasons why we need this information:

  1. How many individuals (not corporates) registered for settlement? – Is it much changed from 26,500 and what of the other 23,500 are they invisible to HMRC?
  2. How many calculations have been issued by HMRC to individuals (not corporates)? Are HMRC struggling to issue calculations due to their own inabilities?
  3. What is the average of those calculations issued to individuals (not corporates)? – because I was damn sure it wasn’t going to be £13,000
  4. Of those issued to individuals , how many signed settlement agreement offers have actually been returned to HMRC? because my experience was that many were struggling to reach agreement and finality
  5. What is the average value of offers at question 4 above? how does it compare to the average value of calculations issued, in other words would the statistics bear out my suspicion that the only people settling those who had the smallest settlement offers and were therefore able to afford it.

HMRC replied that they held the information and agreed it was in the public interest but that they were not going to honour the FOI request because they reserved the right to publish it in their annual report as they say they had always planned, which of course gives them the opportunity to put their slant on it. The  HMRC annual report is likely to be published this month just before Parliament goes to recess.

Now, just to rub salt into the wounds, last week the new Financial secretary to the Treasury Jesse Norman responded abruptly to questions in parliament arguing about protecting the tax base, then this week the Financial secretary to the Treasury Jesse Norman said  in response to a written question in Parliament

The Government estimates that up to 50,000 individuals will be affected by the 2019 loan charge. Since the DR loan charge was announced, HMRC have already agreed around 6,000 settlements with employers and individuals worth over £1 billion”.

Norman said in evidence to the Lords this week that the current figure is 7,000 settlements bringing in £1.5bn

So back to the same old soundbites then!

I think it’s entirely reasonable to pose the following questions:

Why would HMRC wish to withhold this information and only publish it just before Parliament goes to recess?

What does it show?

Does it not support HMRC’s stance?

You would think HMRC would be keen to broadcast the success of their processes to “bear down on tax avoidance” –  is it the case that the up to date statistics do not support earlier statistics given to the Lords, the Commons Treasury Committee, Parliament, MPs, newspapers and the public?

We don’t know but we are minded of tax barrister Keith Gordon’s earlier comments in his evidence about not trusting anything that HMRC say.

Would the civil servants at HMRC really mislead people on the statistics as part of a campaign to drive through the Loan Charge in spite of such public outcry and cross party protestations from MPs via the APPG and debates and questions in parliament? Will the HMRC report ultimately shed true light on these questions?

I think we already know in our heart of hearts what the answers are to the questions I pose above. Is it right to be concerned?

You bet it is.

Watch this space.”

Contractors’ ordeal and HMRC retrospection get discussed on BBC’s Money Box

BBC Radio 4’s Money Box with Paul Lewis, 18/03/2017

A couple remarks to Paul Lewis:
* The contractor has paid the correct amount of tax in the first place, as defined by the law as it stood at the time.
* The contractor did not merely buy into a set-up “he thought was legal”, the set-up was legal under the law as it stood at the time.

This is precisely the reason why HMRC / Treasury don’t want anyone to look too closely at the specifics, and are introducing 20-year retrospective law, in what can only be desceribed as the biggest smash & grab of this century.

There was a number of other inexactitudes in the programme, but I guess there’s only so much you can convey in a programme like this.

Still, let’s remember that for one self-employed getting a few minutes of airtime, there are tens of thousands others silently slaughtered by HMRC, for only two reasons: satisfying Gauke’s personal lust for self-employed blood (did a contractor steal his girlfriend many moons ago? we’ll never know the real reasons, but a vendetta it sure is), and brushing under the rug over a decade of incompetence, inaction and inconvenient truths.

Private Eye nails it again

From Private Eye No. 1433, 9 December – 22 December 2016, page 6 News:

Infernal Revenue

“Last week’s report from parliament’s public accounts committee on HM Revenue & Customs read like a compendium of old Eye stories.

From the disastrous Concentrix tax credits affair (a “complete failure”, with “many claimants being wrongly accused of fraudulent claims” and causing “unnecessary hardship and suffering”) to misleading claims about success investigating tax dodging, the MPs’ message was unrelentingly critical.

But on one point they were wrong. “HMRC’s senior management cannot afford to be complacent about the catastrophic collapse in customer service in 2014/15 and the first half of 2015/16,” said committee chair Meg Hillier MP. The trouble is they can afford to be complacent. The price of failure is simply gratitude from government for mercilessly implementing cuts without care for the consequences.

The HMRC chief executive who presided over the Concentrix and other customer service “catastrophes”, Lin Homer, bagged a damehood earlier this year. Meanwhile, the non-executive chairman of the HMRC board since 2012, Ian Barlow, remains at the head of the boardroom table. Even the minister responsible for the tax system throughout the years that gave the country these disasters, David Gauke, was recently promoted to the cabinet as chief secretary to the Treasury. A similar performance elsewhere would have meant political oblivion. But HMRC’s cock-ups tend to hit lower-income families whose plight can be safely ignored, giving plenty of room for complancency.

HMRC tries another scam

unnamed

Another day, another HMRC “nudge” tactic.

This time, it is an “invitation” for the taxpayer to deliberately misclassify / misdeclare loans as income, for HMRC’s benefit, using a law that doesn’t actually exist as a threat.
There is no statute or case law in existence to back this “invitation”.
In other words: it is manipulation at its finest on HMRC’s part.

In essence, they are encouraging the recipient to file an innacurate return… then in the same paragraph, inform that there are penalties for innacurate returns. 
Even Kafka wouldn’t have made it up.
Note also the neat “I want to help you” faux-friendly tone (did Behavioural Insights Ltd. come up with this?)

It’s little wonder that people fall for “HMRC” scams every day, when actual HMRC correpondance is so blatantly manipulative and deceiving. How this can go out on official letterhead without anyone blushing is beyond us – but hey, we’re not from the Stalin-esque “the end justifies the means” school of thought…

Thanks to the reader who sent us this gem, and shame on you, Harra, Granger, Troup, & the other scammers who authorised this. Soon you will find yourselves so entangled in lies, breaches of procedure, and contradictions of your own making that neither the PAC nor the Judiciary will be fooled anymore. And when the pendulum swings, it will swing faster than you can say “maximizing the amout of tax collected“.

If you are a contractor or recipient of APN(s) and have been offered a dubious “offer you can’t refuse” from HMRC, please get in touch via our contact form.

Some brutal truths about IR35.

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As 90% of contractors at the UKHO resign over IR35, a contractor shares his thoughts…

“There are many reasons IR35 was a shockingly bad piece of legislation. From a personal perspective here is my take on it:

Being inside IR35 basically says that you are really an employee of your end client and trying to disguise the fact. This would be much worse than being an employee for the following reasons:

VAT liability – I asked Her Majesty’s Customs and Excise if I could I deregister for VAT if I was inside IR35. Their reply was that I would still have to charge VAT and that were my company not to do so they would ultimately come after me as a director for criminal fraud. As most of my clients were Financial Institutions who could not claim back VAT, the full amount charged was paid 100% to the treasury. NO EMPLOYEE WOULD BE EXPECTED TO CHARGE OR COLLECT VAT. Nor would they be crimally liable if it were not charged.

During my work for clients my company had to carry Professional Indemnity Insurance. This was almost always written into the client contact. If I was working on financial trading systems, often the premiums for this would be excessive. My company had to also provide Public Liability Insurance. NO EMPLOYEE WOULD BE ASKED TO PROVIDE PROFESSIONAL INSURANCES TO INDEMNIFY THEIR EMPLOYER.

My responsibilities as a company director meant I was responsible for filing Company Accounts and Returns. The clients I worked with would not hire me unless I traded through a Limited Company. NOT ONE EMPLOYEE WOULD BE ASKED TO FILE COMPANY RETURNS, LET ALONE PAY FOR THEM OR BE RESPONSIBLE FOR THEM.

The ultimate injustice was that if I truly was an employee as the Inland Revenue were asserting. they would ask me to pay the Employer National Insurance. NO EMPLOYEE PAYS EMPLOYERS’ NATIONAL INSURANCE. I would also be responsible for the payment of PAYE income tax and Employees National Insurance. NO EMPLOYEE IS RESPONSIBLE FOR PAYING PAYE INCOME TAX AND EMPLOYEES NATIONAL INSURANCE, as this is normally deducted by the employer.

Along with this I would have no employment rights, paid holiday or paid sick leave. AN EMPLOYEE HAS ALL THESE LEGAL RIGHTS.

I personally have no problem paying employee levels of tax. What I object to is paying both employee AND employer taxes. Especially when I have no employee rights and a stack of employer obligations.

Considering all of the above, it is unsurprising wonder that the introduction of IR35 directly caused the “contractor scheme” boom of the early 2000’s…

Have a tax credit and an APN in dispute? Beware this new tactic.

coercition

Have a tax credit and an APN in dispute? Be careful of this new tactic.

Dotas Scandal has received several reports of HMRC using now tax credits to cover outstanding APNs:

“Today i ran into a new situation. Every year i submit my tax return and go through the usual first payment on account, second payment on account. HMRC force you to pay your tax 100% over the amount you submit on your tax return and that normally sits as a tax credit.

I recently submitted my tax return, well actually way before i got letter, for 2015/16. I had a tax credit on my account, which offset against my current tax return would have meant I would not have had to pay any tax for 2015/16.

The letter today stated in simple terms that HMRC had swiped the tax credit and that under Finance Act 2008, they can do this. So basically: “tough luck, we’re not going to offset your tax credit against your latest tax return, we’re going to apply that tax credit to your APN and by the way you now still owe us £XXXXX”.

I am not even sure whether you can still pay current tax obligations. HMRC now seem to say whatever money they get they can apply in whichever way they want.”

It is no secret that HMRC are several £Bn short on their APN collection promises to Parliament, and getting desperate to extract monies by all means necessary.
As the APN well is drying up, expect more accounting tricks and unorthodox “collection” methods to be deployed. Plan accordingly.

HMRC’s creative APN accounting: making a rod for their own backs?

liar

With hardly anyone noticing, the “HMRC wins 80% of avoidance casesalready dubious line we have been hammered with for the past couple years has now discreetly been changed into “HMRC wins almost 90% of tax avoidance cases”. This can be seen in this press release from earlier this month

Why HMRC would do this, and why now? No, it’s not merely for PR purposes.

A commenter on this AccountingWeb thread proposes an explanation

“There is a reason why HMRC have recently changed their objectives to “maximise revenues”, the Government needs your cash. What might a poorly led company try to do in such circumstances, accelerate receipts perhaps? Book income that isn’t actually income perhaps? Did I mention that the whole of government accounts record APN receipts as income even though they are an accelerated payment on account towards something that is still to be tested in Court to decide whether there is actually any tax due?  Equal and opposite debtor and creditor anyone? However the government accounts record all but a 10% provision as income.
Did you notice that HMRC had recently started claiming to win 90% and not just 80% of tax avoidance cases that go to Court. I wonder which came first, the decision to only provide for 10% in the accounts or the analysis of cases that justified a 90% success rate. HMRC have though finally got around to disclosing the cases that they used to get their 80% or 90% results and a number of very professional commentators have asked why the list includes cases that aren’t actually tax avoidance and doesn’t include some which HMRC lost and which any reasonable person would assume should be on the list.
Next thing you know they will be trying to change the past with proposed retrospective legislation….oh wait a minute.
If you haven’t previously read George Orwell’s book 1984 you might want to pick up a copy.”

So there you have it: it’s “creative accounting” (so creative, in fact, that it would make even the Enron guys blush) destined to allow HMRC to once more mislead Parliament by affirming that they have collected “X billions of tax”, when all they have collected is retrospective payments on account of amounts that may or may not be due, to be determined at a later time.

Rumor has it that the law of diminishing returns has hit HMRC hard in their operation of the APN regime, HMRC having great trouble “collecting” from individuals, who 1/ simply  don’t have the money 2/ insist on exercising their legal rights and have initiated Judicial Reviews (how dare they!).

So what’s HMRC to do? why, requalify 10% of the amounts already collected from “payment on account” to “tax collected” to make it looks like the money is still flowing in…when in realitythe well’s hopelessly dry.

And hope that Parliament doesn’t question the figures.

Sam Allardyce summarizes HMRC and APNs

west-ham-524436

Sam Allardyce says it like it is:

“It’s the most corrupt business in the country at the minute, HMRC”

“They fly out tax demands without any real knowledge whether they should or shouldn’t.”

“They just put ‘em out willy-nilly and  people s*** themselves and pay them.”

“Then they go to your accountant, and if you’ve got a s*** accountant, the accountant s**** himself and says, well you must owe them, you had better pay it.”

Sounds spot on to us!

 

For HM Government, are well all like Pavlov’s dogs?

War is peace

Last month, a horridly biased propaganda piece published in the Economist  made many alarm bells go off for those familiar with mental manipulation techniques – to the point that some readers questioned whether the infamous “nudge unit” could have helped pen the piece.
Would we put it past HMRC to now plant articles in reputable publications? Certainly we wouldn’t.

One commenter well versed in Behavioural Psychology offered interesting insights into the methods used and the aims behind them.

 “Some of the presuppositions in the language lead me to wonder if it could actually have been written, in full or in part, by a former department of the Treasury known as the Behavioural Insight Team.

To let you understand, the Behavioural Insights Team used to be a department of the Treasury but have now been hived off as a private company part owned by individuals and part by the Government. They use Behavioural Psychology to influence your decisions. One of their stated objectives is enabling people to “make better choices for themselves”. Oh really! Rather Orwellian I feel, but then behavioural psychologists do believe that we are just animals that can be manipulated, remember Pavlov’s dogs? Interestingly it would seem that Behavioural Psychologists must presumably believe that everyone just operates on animal instinct…except them. You can check out their website or indeed find them on Twitter. Their aim is to influence your behaviour and it would appear to be highly lucrative for them. Indeed in their first year of trading they managed to amass a Turnover of £4.8million and made a profit of £1.8 million. Their customers primarily being you and me, the taxpayer, in the guise of other government departments. I don’t know who will benefit from that profit but I do know that they are part owned by an EBT (Employee Benefit Trust). You really couldn’t make this up!

I digress. Back to the article.

It starts with the heading which pre-sets the expectations by referring to ‘dodgy’ tax structures.
The opening sentence states a bare faced lie (that tax avoidance isn’t legal) and makes no apologies or no attempt to water it down, so if you accept the source as being knowledgeable or authoritative, then there is a chance that you accept the opening, shamefully false, statement and if you read on without questioning that….then the scene has been set.

The first paragraph explains who is going to be the target of the article/attack and even gives them a derogatory name in quotes so that we can be relieved that it is not us who is the target, we can sneer at the “pinstriped mafia” who are the target and we are effectively given permission to dislike them and see them as the enemy, and of course putting this in quotes actually gives it authority as in “experts say”…, but then because it is in quotes, you can’t pin it on me because I didn’t say it.

The third paragraph implies that those who design, market or facilitate the use of tax avoidance arrangements could be fined a sum equal to 100% of the tax, but as Dr Bartolo has already very eloquently pointed out in the comments section, tax avoidance is perfectly legal (and any attempt at quantifying it is purely a wish list of HMRC). Surely you can’t fine someone for acting within the law. Quite so, but the paragraph reads as if it will be the case that anyone in the vicinity of the tax structure will be fined, legal or not.

This is an attempt by the Government to influence behaviour rather than run the risk of challenging these tax avoidance promotions in court and face the possibility of losing.

In this case they are trying to frighten the Accountants and similar professionals away from this area of tax avoidance. It’s all about collecting more cash. What I object to is the fact that they are trying to do it covertly by using NLP type language structures designed to influence behaviour and it’s hidden within their publications. The Behavioural Insights team are proud to call themselves the ‘nudge’ unit. They are trying to nudge you in the direction of the behaviour they want to see you take, even if that means you pay more tax than is legally due. They think they are smarter than you. It is no coincidence that HMRC recently changed its stated aims from collecting the right amount of tax, to ‘maximising revenues’”.

Other comments all also worth a read (notably those of Dr. Bartolo)

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A can of HMRC worms

canFor a casual onlooker, HMRC’s recent obsession with retrospective tax legislation (once a taboo and something to be strictly reserved for “wholly exceptional” situations) as well as their extreme level of vindictiveness against normal, non-fat-cat individuals, may be somewhat puzzling.

Indeed, what is it that is “wholly exceptional” about contractor arrangements that have been (and still are) marketed to tens of thousands of independent professionals for over a decade, with HMRC’s tacit approval? The answer is: “nothing“.

So, we have to look elsewhere for clues.

To understand HMRC’s otherwise inexplicable resort to what can only be seen as very desperate measures, we have to go back to the beginning to the early noughties and in particular to the introduction of the infamous IR35 legislation, which came into force in April 2000.

As is the case anytime HM’s paper-pushers attempt to micromanage the behavior of contractors and entrepreneurs (species so alien to them that they might as well inhabit another dimension), a slew of unintended consequences followed.

One of these unintended consequences was the sprouting of the so-called “contractor scheme” industry, which restored to independent professionals the certainty as to their tax status which had been taken away by IR35.

For nearly a decade and a half, HMRC allowed these schemes to exist, to be promoted, to operate, without batting an eye.
For nearly a decade and a half, year after year HMRC accepted fully transparent tax returns from taxpayers utilizing such structures without ever uttering a bad word about the arrangements.

The problem is that by adopting this complacent stance, HMRC in effect validated the very narrative used by the promoters: “HMRC is fine with it. They are not saying anything about it because they know it is all above board”.
Sometimes, not always, an individual would receive a “notice of enquiry” from HMRC, which would state in essence: “I would like to look into your tax return. Every year we check a number of tax returns. You have nothing to do, and I will let you know if I find anything wrong.

This would more often than not prompt a panicked contractor (whose risk appetite generally stops at “being out of contract”) to run to the structure’s operator, only to be reassured that “HMRC routinely sends this letters to anyone who has disclosed participation in a contractor arrangement” (keyword: disclosed).
“Don’t worry. They will not do anything further
“, they would say.

And….

That is precisely what would happen

For 10 years, there would be no follow-up whatsoever. Result? “What the promoter said is true!”, the contractor would think.

So the contractor is reassured. The contractor recommends the scheme to other contractors looking for certainty and peace of mind.. Lather, rinse, repeat. The scheme industry grew exponentially. Promoters got rich beyond their wildest expectations.

At this point, it is necessary to pause, and understand this crucial point:
“Contractor schemes” would have remained a very marginal thing had HMRC done as little as lift a finger, get off their behinds, and produce back then one of the cutesy little “tempted by tax avoidance?” leaflets that they have been sending lately to every contractor and their dog – a good ten years too late.

By looking the other way, HMRC did in effect validate the promoters’ narrative that “HMRC is ok with it”, resulting in schemes being recognized in the contractor community by and large as a “safe” vehicle (even more so if DOTAS-registered).

If you are looking for the number 1 factor for the boom of “Contractor schemes”, there you have it. The operators simply couldn’t have dreamed of a better ally (or dare we say tout?) .
The proliferation of “schemes” could have been trivially easy to stop dead in its tracks, if it hadn’t been for the complacency/incompetence/complicity of HM’s services.
What have HMRC been doing (or rather, not doing) in the previous 10 years? Who was in charge, and who failed miserably in their most basic duties?

This is the can of worms that they don’t want opened.

With this in mind, it becomes crystal clear why the Revenue are now so busy trying to organize a cover-up of epic proportions, from which there will be no coming back for contractors. And why, seemingly, anything goes: retrospection, lies, revisionism, exceptional “2019” charges.

It’s a tough job though, with some 30 000+ witnesses to silence (some of which – imagine that – insist on exercising their legal rights)

HMRC did not want to litigate sound schemes and lose (current count of HMRC victories against contractor schemes: zero*), so effectively it appears that someone high up had a long silent think over whether and how to go retro. Thus the abomination we know as APNs were born.
Make no mistake: HMRC do NOT want their failings examined by the judiciary. Therefore everything must be and is being done to prevent any “contractor scheme” court case to go ahead.
But this too shall fail.

This pungent can will soon be cracked open in earnest, and the many worms it contains will be put under a microscope one by one for detailed examination.

Something tells us that there is going to be a lot of “Oh”‘s and “Ah…”‘s.

*: for all of HMRC’s references to the “Boyle case”, it is important to consider that “Boyle” failed on implementation, not on the underlying principles of the arrangement.