As expected, last week’s Budget followed up on HMRC’s previous consultation document entitled “Tackling Marketed Tax Avoidance” buy introducing yet another weapon in the Government’s armoury in ensuring everyone “pays their fair share of tax” – hot on the heals of DOTAS and GAAR, and following HMRC’s published proposals we will shortly have the “Accelerated Payments” legislation.
This legislation, which may well be challenged through the Courts as illegal in its nature, is designed to counter the cash-flow benefit to users of high risk tax schemes by allowing HMRC to collect any disputed tax up-front, with the Government confirming “this policy reflects the government’s view that, during investigations and litigation into avoidance, the tax should sit with the Exchequer, not the taxpayer. This approach will not change the underlying rules and the taxpayer will be free to continue to make its case to the tribunal or court. If the taxpayer is successful, the money will be returned with interest”.
On the face of it, once the legislation receives Royal Assent in July, it would appear to be retrospective with the Tax Impact Note confirming that HMRC will be given the power to issue a Notice to Pay to “any taxpayer for whom there is an open enquiry, or the matter is under appeal, and who has claimed a tax advantage by the use of arrangements that fall to be disclosed under DOTAS, or HMRC counteracts under the GAAR following an opinion of the GAAR Advisory Panel that, in the Panel’s opinion, the arrangements are not a reasonable course of action”.
In their defence of this measure, the Government confirmed “this new power will remove the cash-flow advantage for the taxpayer of holding onto the disputed tax during an avoidance dispute. It will also provide HMRC with additional tool to address a legacy stock of an estimated 65,000 avoidance cases. The new power will only apply to tax avoidance schemes that are disputed by HMRC. The legislation will make it clear that HMRC will only be able to issue an accelerated payment notice where they have first sent the taxpayer an enquiry notice or issued them with a notice of assessment. It is not a new tax demand and does not make any changes to tax liabilities. If the taxpayer subsequently wins their case in the courts, they will be reimbursed with interest”
Now we are all for a level playing field and welcome anything that legislates against the ridiculous array of avoidance schemes that seem to be continually played out in the press involving the likes of Jimmy Carr, Chris Moyles, Take That et al.
However, this legislation could be far reaching and again, retrospective – another recurring unhealthy feature of tax legislation over the past few years, with HMRC now appearing to have the power to dispute any planning they consider aggressive (by arguing it within DOTAS or GAAR) and then having recovery powers to collect tax from taxpayers bank accounts (another unhealthy new power buried in the Budget).
With the taxpayer having then effectively paid their tax up front, are HMRC likely to litigate with the current urgency they have? Highly unlikely but the obvious, perhaps aggressive counter argument that will no doubt follow from many promoters is that their (future) planning ideas may no longer need to be disclosed!
Interesting times ahead for those that continue to fish in the avoidance pool!