The Government Must Crackdown on Tax Avoidance Schemes
With people continuing to be targeted by tax avoidance scheme promoters who have played a part in condemning up to 100,000 people to the nightmare of the Loan Charge, Renew’s business spokesperson Gary Burke, says it is time the government got tough.
With the Finance Act 2020 receiving Royal Ascent in July 2020, the hopes of up to 100,000 people who are subject to the draconian Loan Charge legislation (which retrospectively changes how tax law is applied in the UK) were shattered.
In its original guise the draft Loan Charge legislation allowed HMRC to look-back to 1999 and re-assess how much tax thousands of individuals needed to pay; individuals who used legally promoted tax schemes that HMRC were fully aware of, and who submitted their annual tax returns in full accordance with prevailing requirements i.e. everything was above board and legal.
After almost universal criticism of the Loan Charge legislation, including an All-Party Parliamentary Group (APPG) consisting of more than 230 MPs from all parties, the House of Lords as well as tax and accountancy bodies, an independent review conducted by Sir Amyas Morse was undertaken. This concluded in December 2019 and it made various recommendations to the draft legislation; one of which was to limit the ‘look-back’ period to start from December 2010 when it was asserted that the law became clear.
Ignoring the issues that have subsequently surfaced regarding how independent the review was, it is the ‘law was clear’ point that is deeply contentious.
Many tax experts, including Phil Manley, a former tax inspector who led HMRC’s technical response team for Accelerated Payment Notices, argue that the law was not clear until 2017. This view is further reinforced by changes that were made to legislation over the following years, and court cases that HMRC continued to lose.
The Morse review also found more than 65,000 instances of scheme usage occurred between April 2011 and March 2016; not a great endorsement for a supposedly clear law.
However, the assertion that the law was clear may soon be tested in court as Mr. Manley is leading a challenge on this point, with funding currently being raised through his campaign website https://www.loanchargelegal.com.
A further recommendation from the Morse review, and one long overdue, was that the role of scheme promoters should be looked at. As a result, in August 2020, the government launched two new consultations to deal with tax avoidance:
- Tackling promoters of tax avoidance
- Call for evidence: Tackling Disguised Remuneration tax avoidance
The first of these consultations includes considering how to deter taxpayers from taking up such schemes. The second consultation seeks to understand, amongst other things, what drives the continuing use of these tax avoidance schemes.
Between April 2019 and May 2020, HMRC themselves have identified more than 45 schemes being marketed and aimed at individuals, designed to avoid tax on employment income. As is stands, some 20,000 former NHS staff have returned to the NHS to help with the Covid19 pandemic and HMRC has confirmed that unscrupulous promoters are targeting those returning workers with cold calls and emails to try to persuade them to use tax avoidance schemes.
Renew’s message to the Government is very clear:
- Regarding the Loan Charge, HMRC need to recognise that the individuals subject to the Loan Charge were following the rules and the law at the time, and do not deserve to be punitively victimised
- Regarding the tax avoidance scheme promoters (and the still legal promotion of these), MAKE IT ILLEGAL! and, when promoters are caught, impose very heavy fines and prison sentences; and, if you won’t do that then please explain why not!