Tag Archives: manipulation

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

grudge

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 ” ..to 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”

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80% of cases are won by HMRC?

From C3 :

(… ) “The claim of an 80% pinocchiosuccess rate in all tax avoidance cases has been the bedrock upon which HMRC has justified the need for the introduction of APNs and FNs. However, after looking closely at the cases which form this percentage we must conclude that this justification is tragically flawed with a distinct lack of correlation between the arrangements in which the vast number of taxpayers have participated and those cases which progressed to the tribunal stage in the selective period that HMRC used as their statistical base”

Read the full article here

HMRC’s creative arithmetic

An interesting read on Tax Research UK about the “creative” artihmetic HMRC uses to justify their quest for ever expanding powers.

Does it bring into question the credibility of the figures presented by David Gauke to make a case for Accelerated Payment and Follower Notices? You be the judge.

“HMRC’s claim to be collection 23.9 B a year from compliance is about as bogus as a fraudster’s tax return”

Are you a “soft target”?

softtargetFrom The Telegraph :

“(…) HM Revenue & Customs made inquiries about the tax affairs of 237,215 people last year, compared with about 119,000 in 2011-12, figures obtained by The Daily Telegraph show.

The number of self-employed people investigated has quadrupled in that time while annual prosecutions have risen sevenfold in three years.
The figures are evidence of the attempts HMRC is taking to minimise the estimated £35 billion of tax lost every year.
Experts have warned that people who have made simple errors when filling out self-assessment tax returns are “an easy target” for HMRC.

Tax experts warned that “soft targets”, middle-class professionals such as doctors, lawyers and teachers, were being targeted. They were more likely to settle any claims without dispute because they felt “anxious” when HMRC sent warning letters.

A Tory MP on the Commons Treasury select committee said last night that HMRC had been “given a mandate to aggressively go about trying to collect tax” and accused it of “nit-picking”. (…)

Comment from Dotas Scandal Team:

To put things in perspective, here are HMRC’s own figures on what makes up that “35bn estimated loss of tax.

5.4bn Hidden Economy (criminal activity)
5.1bn Evasion (a criminal act)
4.7bn Criminal Attacks (obviously criminal)
4.4bn Non Payment (tax written off due to insolvency etc)
4.3bn Failure to take reasonable care (mostly inadvertent under-declaration)
4.3bn Legal Interpretation (a legal dispute between HMRC and the customer over the interpretation of tax legislation)
4.0bn Avoidance (operation within the law but not achieving what the government intended)
2.9bn Errors (Mainly theirs)

And the “estimation” again by classification of groups causing that tax gap:

16.7bn Small and medium sized businesses
8.8bn Large Business
4.7bn Criminals
4.7bn Individuals

And all these figures include VAT, a major source of revenue.

So of the total amount of roughly 35bn:

15.2bn requires establishing criminal activity.
4.4bn cannot be recovered largely because of insolvency
4.3bn requires legal clarification.
4.0bn is completely legal
2.9bn is mainly their fault

And the remaining 4.3bn is the “Failure to take reasonable care”.

Assuming that is split in the same proportions as the overall classification estimates, non criminal individuals will account for roughly 577m.

FT: “Osborne must not exploit public anger to make bad law”

George-Osborne_cFrom Financial Times :

“(…) In his recent Budget, George Osborne declared that public tolerance for people who did not pay their share of taxes had “evaporated long ago”. He seems more than willing to exploit the mood for his own ends. But while some elements of his proposed crackdown are justified, others are excessive and need rethinking. (…)

(…) One of Mr Osborne’s new measures regards individuals who declare they are in a tax avoidance scheme and then become embroiled in a legal dispute with HMRC over whether it is an acceptable one. (…)

(…) This proposal is justified. People who have entered into tax-avoidance schemes should not be granted the privilege of holding on to the disputed cash while court proceedings drag on for years. However, a controversial aspect of Mr Osborne’s plan is that this new rule will retrospectively apply in some 65,000 cases that are still being disputed. This may trigger a sudden cash flow crisis for some individuals who entered into schemes many years ago. A more general concern is that the government should only apply tax law retrospectively in the most exceptional of circumstances(…)

(…) A balance must always be struck between the power of the tax authorities to exact what is due; and the right of individuals to keep their assets protected within the law. Britain’s elaborate tax-avoidance industry must be tackled. But public anger on that issue should not lead ministers to write laws that are far too draconian.”