Tag Archives: Rule of Law

Guest post: “End of term report – the view from form 4D”

by Graham Webber.

There is published in the Tax Journal of 30th April 2015, an excellent article by Graham Aaronson and Steve Bousher, which is a report on the late coalition’s efforts to tackle tax avoidance. It’s well worth a read.

In my personal opinion the article focuses on how the measures introduced by the late coalition Government impacted multinational companies and high net worth individuals. It fails to consider the thousands of less wealthy taxpayers who are caught as collateral damage.
I’d agree that the Government/HMRC addressing public opinion and getting it “on side” was a successful start although I remain confused over why Jimmy Carr (entertainer) was subject to adverse comment from the very highest level of Government, whilst Gary Barlow (entertainer) was not.
The article points to the key themes of the campaign to reduce avoidance, make it unattractive financially and to punish those who facilitate such schemes. All reasonable in the economic climate between 2010 and 2015 and all arguably looking to protect the economic recovery so often lauded if so little noticed by those who are not “high net worth”.
There is reference to the “introduction of measures” and “reducing the risk” of avoidance. The implication being that new rules would catch new schemes or perhaps even the effects of old schemes that continue beyond the effective date of new rules. This is the usual way of bringing new tax rules into force. If this is the case, then nobody can complain.

What is harder to stomach, especially for the members of form 4D who are unlikely to be “high net worth” is how these rules can generate life changing demands from HMRC for “schemes” that were finished and wound up long before the coalition was even imposed upon us.

Contractors are a very large group of people who are well paid, specialist in their areas and subject to a bewildering array of tax rules. In essence HMRC wants them all to be employees. Contractors and their clients don’t want this. Why would a large firm employ a specialist as an employee for a project that may require only a few weeks or months work? A contractor is often less expensive than a full time employee and does not arrive with the inevitable red tape burden.
Many contractors operated via “schemes” that promised low administration, no employee relationship and as a bonus, reduced tax. The tax reduction was achieved in the same way as an (employed) banker’s bonuses in many cases. HMRC launched enquiries in 2007 and 2008 and then …nothing.
With the APN regime now live, many contractors, having heard nothing in 5 years, 6 years, more, assumed that the demand now lying on their doormat was an error. (A lot of them are wrong). However, they’re not. They are live and need paying.
Having been lulled into thinking that no news was good news, this group of very much NOT high net worth people are looking at bankruptcy and loss of career and lifestyle partly at least because of the dilatory approach of HMRC.
This factor is likely to be far more harmful to “fairness” than the dressing down unfairly delivered by the PAC to HMRC.

It’s fine to focus on the wealthy and super wealthy and if I were selling newspapers I would do that. I would agree with the principles that the last coalition introduced in the main.
I fear however that the actions and experiences of the few thousands of high net worth individuals who indulged in tax avoidance is an excuse to visit huge UNFAIRNESS upon tens of thousands who have never made the top set.

Graham Webber is Director at WTT Consulting Ltd

Retrospective taxation and the rule of law

magna cartaFrom Adam Smith Institute :

“It is quickly becoming obvious that the rule of law does not apply to UK taxation any more. Already, schemes under which people arrange their affairs in ‘tax efficient’ ways that are perfectly in line with the UK’s (absurdly long and complex) tax code, are being struck down by HMRC, simply because they are arrangements designed to reduce a person’s tax bill. And now, it seems, HMRC can now make up new rules and make them apply to actions that take place even before the rules are put in place.

This is a mediaeval attitude to justice, redolent of the age of Morton’s Fork. That was the ingenious design of John Morton, Archbishop of Canterbury in the 15th century, who argued that a man living modestly must have plenty of money saved and could therefore be taxed, while a man living extravagantly was so obviously rich that he could easily afford to be taxed. (…) “

The Law Society slams David Gauke over retrospective legislation and disregarding the Rule of Law

Tax policy confusion ‘hugely damaging’, say City lawyers

From The Law Society gazette:

A ‘disturbing pattern’ is emerging where legislation is introduced with ‘minimal or ineffective’ consultation.

Concerns are raised that tax policymakers are ‘insufficiently conscious’ of the importance of the rule of law and over-reliant on guidance. The current government, it adds, has legislated retrospectively against certain types of stamp duty land tax avoidance schemes even though they had been known to HMRC for some time.

‘We do not consider that this is acceptable. Businesses must know that the law in place when transactions take place will be the law that applies to them’.

‘This principle is either absolute or it is nothing – once it has been broken once, further breaches are only questions of degree, the committee says.

(…and as it happens, the principle has been broken once already)