If you owe money to the taxman or have used inadvisable means to pay less tax, it's likely you're worried...
Why has HMRC Been Accused of Being Out Of Control?
In recent months, HMRC has come under fire, accused of a heavy handed approach to tax collection and having being given too much power and too little accountability. The controversial April 2019 loan charge, one particular, high profile example. Tax is something no-one can avoid and the implications of owing tax are often a source of stress for people and businesses who are either insolvent and cannot pay the tax demanded of them, or who have been made insolvent by the tax demanded of them.
In many cases, HMRC are in a tough position, on one hand, they’re responsible for making sure that the public services we all rely on are funded by collecting the tax owed to the treasury. On the other hand, the way HMRC goes about collecting tax and the decisions it has made have seen it accused of being out of control and accused of unreasonable behaviour in the way it’s been seen to over-tax people. With few aspects of HMRC’s conduct coming under fire quite so much as the April 2019 loan charge.
Is HMRC Really Out Of Control over the Loan Charge?
The April 2019 Loan Charge relates to a particular tax avoidance scheme where workers recorded a proportion of their income as being a ‘loan’ for tax purposes rather than remuneration and as such did not pay tax or national insurance on it. Indeed, some workers were required by their employers to do so. Tax avoidance is perfectly legal. Such schemes, where used would have been declared as part of annual financial reporting under rules relating to the disclosure of tax avoidance schemes. HMRC however, have been treating these schemes as disguised remuneration, which has been looked on as poor form due to schemes being fully disclosed and as such, not disguised at all. More controversial was HMRC’s decision to seek up to 20 years worth of backpay from the users of such schemes.
Accusations leveled at HMRC for its conduct in respect of the loan charge have been widespread and vocal. Critics have accused HMRC of introducing the Loan Charge with the intention of bypassing taxpayer protections and other legal processes, of undermining due process and, along with The Treasury, producing a flawed impact assessment and cynically waging a campaign of misinformation as to the likely impact of the loan charge.
It’s easy to see how being asked to pay up to 20 years worth of tax would cause severe financial problems for those suddenly finding themselves owing it. Added to this, HMRC are able to use accelerated payment notices (APN’s) to demand that those it believes owe tax, pay up sooner and if they want to challenge it claim it back later. With HMRC’s record of overtaxing and having to refund those it’s over-taxed in other areas already having been highlighted.
There have been calls for HMRC and the Treasury to be investigated and for their powers to be be curtailed, not least by an increasing number of members of parliament, who themselves under pressure from their constituents.
If you’ve made use of tax avoidance schemes which are the same as, or similar to those HMRC are pursuing, you may already have received a demand, or are worried about the implications should you receive one. in the first instance, contact Lines Henry for a free consultation and we can discuss your circumstances and give you advice on what to do next.