In 2015 I worked with the BBC Today programme on an investigation into a recruitment agency called the Anderson Group that looked as if it was running an abusive tax scheme involving the use of thousands of separate companies to avoid liabilities that would otherwise be owing.
Today the Guardian reports:
An aggressive tax avoidance scheme, linked to one of the recruitment industry's highest-profile names, is being liquidated in a move that could prevent HM Revenue and Customs from recouping millions of pounds.
The scheme, which experts say raises questions over triggering a possible criminal investigation, has been promoted by Anderson Group, one of the sector's leading financial services firms. It has been used by recruitment agencies supplying low-paid workers to businesses including Marks & Spencer and Dixons Carphone.
The arrangements - which work by setting up thousands of tiny firms to exploit VAT and national insurance rules that were originally designed to help very small businesses — have netted vast windfalls for those involved.
The Guardian has seen evidence showing that the closure of parts of the scheme followed Anderson being asked by HMRC's fraud and investigation service for details about the large numbers of VAT registration applications made on behalf of Anderson clients last year.
Documents show that almost 2,000 of the Anderson scheme's mini companies are now being simultaneously liquidated.
Tax experts say the moves make it extremely difficult to pursue the defunct firms for any potential VAT or national insurance debt — particularly as each mini company appears to only have a Philippines-based director and barely any retained assets.
They add:
In 2015, following a BBC investigation into Anderson, HMRC issued a notice advising anybody using schemes designed to exploit the employment allowance to withdraw from doing so to “avoid the costs of litigation and minimise any interest and penalties due on underpaid national insurance”.
My questions are threefold.
First, why has it taken HMRC so long to act?
Second, why can't we change the law so that tax abuse cannot be protected by limited liability and the perpetrators can be held personally responsible?
Third, why do we provide limited liability so readily when so often it is used for such purposes? The government's desire to slash regulation is going to cost us a fortune, yet again.
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It’s not just tax. Their woeful failure to recognse that environmental regulation enhances benefits from natural capital has been another sorry sorry story.
The answer to question one is because since the merger of Customs and Excise with the Inland Revenue the latter department’s culture became dominant in HMRC which meant they took months to consider which cases to investigate and how to investigate them and were fearful of “upsetting the customer” , in contrast to the old C and E practice of going in hard and fast and looking for quick results.
Perhaps limited liability needs reform. It seems to bestow lots of advantages and requires little in the way of reciprocity.
Precisely
Perhaps you could set a good example by renouncing your own limited liability status? It’s not easy to criticise a status you are using yourself.
Limited liability has proved to be of use to society. Like many other things of value it can be abused. That does not mean it need be abolished. It does not require that the abuse be condoned. Only trolls suggest such thing and there is an easy answer to trolling
‘Second – why can’t we change the law’
Laws already exist to counter this and strip away limited liability. Have done for ages.
I would have hoped a self-proclaimed tax expert would know this.
Im some very limited cases of criminal liability they can
Generic laws to prevent tax abusers securing gains via limited liability for which i was calling do not
Your comment, like that of the average troll, mis-states the truth and quotes out of context
“Im some very limited cases of criminal liability they can”
The current law allows for the recovery of VAT, income tax and national insurance from an individual who fraudulently uses limited liability status to avoid paying them.
How would you want that extended?
And it very, very rarely happens
I am asking for default removal of limited liability and you know that does not exist
How an earth can May claim to want to work with others when crap like this is still being perpetrated?
When you vote Tory (or Blairite Labour perhaps too) all you are getting is politicians obtaining a role that they do not believe in i.e. Government.
Who in the real world would employ someone who did not believe in what you were there to do? Who in the real world would want to employ someone who wanted you to to lose money? Or sell your best assets off to your competitors (below market price too)?.
Yet this is essentially who the modern Tory party are. The worst employee you could ever hire for a job in Government.
Yes, yes, a 1000 times yes, exactly what I’ve been thinking myself for years; Richard’s cowardly state politicians summed up in a nutshell. Why do right wing politicians want to be part of something they don’t like and don’t believe in?
Why would you want to be part of government when you think government is ‘bad’, the profit motive is the best way of doing every type of activity in a modern economy, and the public sector is to be feared and disliked.
Or could it be that (as many a cynical left winger has observed) the right go into government to use it’s power (even as they rail against the power of government) to give themselves and their fellow travellers in the private sector all sorts of financial and legal benefits which they resolutely refuse to provide to the population at large?
So corporate welfare is fine, but properly functioning state education, healthcare, social care, infrastructure, housing, law enforcement and (even) armed forces are not.
Ah yes, I’ve just answered my own question haven’t I?