The FT has reported this morning that:
Plans to recruit dozens of new judges have been drawn up to cope with a wave of litigation expected in response to a £7bn crackdown on tax avoidance that starts next month.
The tax tribunal is gearing up for a surge of legal challenges, after tens of thousands of financiers, celebrities and other users of avoidance schemes are issued with demands to pay tax avoided over the past decade.
The immediate need for new judges comes from the fact that the legislation to be included in the Finance Act 2014 will let HM Revenue & Customs issue demands for disputed tax payments before a tax case is resolved if similar cases have already been concluded in favour of the government. This is expected to bring forward a whole raft of potential tax litigation where people finally have to get off their backsides and present their case for their abuse, or pay up.
As is apparent from social media, this new legislation is deeply unpopular with those who have partaken in this type of tax abuse. They believe that to be asked to pay tax before liability is proven is unjust, whilst ignoring that in practice this is what happens every day in the PAYE scheme that applies to the earnings of most people in this country.
I have very little sympathy with these people. Up to £7 billion is thought to be at stake here. It is money that the government needs and that tax abusers are most likely to owe. If we need some new tax judges to get the money in that's a good investment. It's just a shame that the government does not realise that broader investment of the same type in the whole of HMRC would be an equally sound investment because the potential yield, as I have shown, is enormous, and vastly bigger than they estimate.
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Richard, you were quite exercised a couple of months ago at the possiblity of HMRC having “unfettered” rights to poeples’ bank accounts. As you approve of this measure, it was obviously another measure that concerend you. Could you tell us what that measure is.
The measure that concerned me was the right of HMRC to take money direct from people’s bank accounts
This is not that issue. This is the right for HMRC to demand payment when it is clear that a person has partaken in a tax abuse scheme which has already been proven not to work
Thanks for clearing this up. I would be grateful if you could point me (us I guess) to the actual measure; it does seem odd.
One point though: I note your comment “They believe that to be asked to pay tax before liability is proven is unjust, whilst ignoring that in practice this is what happens every day in the PAYE scheme that applies to the earnings of most people in this country”
I don’t believe the analogy stands up. PAYE is an amount withheld by the employer and based upon returns prepared by that employer. Except in very unusual circumstances there isn’t any dispute as such. Also this is withholding, a payment on account and quite a common method. It is hardly analogous with a return that says an amount isn’t due being disputed by HMRC. I am NOT saying that I disapprove of the measure (because you do scream ‘Neoliberal’ as a reflex don’t you) but it is quite important to find an appropriate analogy here.
There is a vast body of literature in the press on the measure to take funds straight from bank accounts.
The PAYE point is important: if the taxpayers who had used abusive schemes had been subject to PAYE they may not have received refunds. It is the fact that most will not have paid on account that makes this new measure relevant.
The measure was in the 2014 budget.
Fully reported in the FT:
http://www.ft.com/cms/s/0/1f8080d6-af8d-11e3-a006-00144feab7de.html#axzz35SoPylV8
Yes, but that literature mixes the two measures – you know how the ‘general’ press mangles tax stories. I am not familiar with the difference, an ignorance I imagine is shared. So your instruction would be helpful.
On the PAYE analogy, I’m sorry but I think you’ve mangled it a little. PAYEis witheld by AN EMPLOYER based upon ITS opinion on the employee’s liability. Employment avoidance schemes are usually (nearly always) a joint employer/employee effort. So PAYE doesn’t act like HMRC taking a payment on a disputed basis. Indeed PAYE most defintiely DOESN’T act to take disputed payments.
Respectfully, I have made my point and you are time wasting
PAYE deductions aren’t based on an employer’s opinion (subjective) of the employee’s liability. Tax codes issued by HMRC and PAYE regs objectively instruct the employer with regards to the tax deduction.
I have close friends in HMRC and PCS. You may remember last year’s debacle that was Tax Credit Renewals. When Margaret Hodge slammed the Department and accused HMRC of failing to answer 89% of calls, Ruth Owen, Head of Personal Tax was quick to correct her – it was in fact 84%.
http://inparticularorder.com/2013/09/03/only-1-in-10-calls-answered-on-tax-credits-deadline-day/
Having sacked a ruck load more staff (including those in contact centres), HMRC are now in a blind panic over this year’s peak in July and what Mrs Hodge might make of their efforts to improve on last year. Their answer has been to conscript staff from all over the department into Tax Credit Contact Centre work to bolster the ranks. They will give them 1 weeks emergency training, stick a headset on them, and sit back with their fingers crossed. It would be funny were it not so tragic for the staff and customers, and for those who believe in HMRC providing an effective front line service. And yes, the conscripts include people undertaking front line compliance work, so there is bound to be a knock on impact on yield (perhaps worth an FOI request once the dust has settled). Emails have even been circulated showing that at least one member of Excom has volunteered for a stint on the phones.
PCS members in HMRC are on strike this week as HMRC refuses to consult with the union over staffing levels and further planned job cuts.
PAYE? You seem such a fan of it yet in past you have paid your self dividends to avoid the employer’s NIC that would have been due under PAYE and currently operate through an LLP and so sidestep the PAYE system altogether. So you want others to pay tax upfront yet dodge employer’s NIC and defer paying tax for as long as you can?
If you bothered to look at the detail you would find that not a penny was avoided by paying dividends in the company’s in question as dividends were less than the NIC level for those who would have had salaries. So actually all the dividends did was save the admin of an unnecessary PAYE scheme. The suggestion there was avoidance is wrong
And as for an LLP – I am sorry, to suggest using an openly available structure in exactly the way designed by law is avoidance is simply absurd and indicative that you are simply seeking to make scurrilous comment.
You will not be making any more. Your future comments will be deleted because it is clear you have nothing to add to debate