Throughout the year tax is the burden every individual and business has to suffer. In our July blog Tax Director, Graeme Lovell looks at the recent tax saving news making the headlines of even the national press. Graeme would be delighted to speak to anyone looking to lower their tax liability.
So, the Olympics are finally here. But during the time the Olympic torch has been wending its way around the country, the government has been fanning the flames on another much-heralded matter – countering tax avoidance.
Not content with the carnage caused by last month’s publication of a consultation agreement on ‘A General Anti-Abuse Rule’ (“… targeted at artificial and abusive tax avoidance …”), HM Revenue & Customs have this week done a Usain Bolt style ‘double up’, by issuing another consultation agreement. ‘Lifting the lid on Anti-Avoidance schemes’ is supposedly intended: –
“…to improve the information available to HM Revenue & Customs and customers [*] about tax avoidance schemes and the risks of using them, including proposals to revise and extend the Disclosure of Tax Avoidance Schemes (DOTAS) regime, which requires promoters and users of tax avoidance schemes to provide information to HMRC …”
* ‘customers’ is the ludicrous HMRC term for what the rest of the UK knows as ‘taxpayers’.
What happens now is that anyone who has an opinion is entitled to sound off for the next 3 months, before HMRC decide how much of what they don’t like they can ignore. In the meantime, the issues have almost created civil war amongst taxation analysts and practitioners. The Times started ‘outing’ Jimmy Carr, Gary Barlow and a whole host of other celebrities last month as alleged tax avoiders. Even that most celebrated Olympian Sir Chris Hoy felt compelled to respond to criticism concerning his own tax arrangements by issuing a press release which said: “I am very proudly British and my responsibilities as a British sportsman do not stop once I step off the bike”. To be fair to him, the matter he was being asked to comment on appeared to be nothing other than borrowing money from his own limited company, in the same way that thousands of other business owners do on a regular basis, but the facts seem to have got lost in the journalistic clamour for high-profile sacrificial lambs.
It was therefore something of surprise that Michael Izza, Chief Executive of the Institute of Chartered Accountants of England & Wales, signed his name to an article only last month which said: –
“… any ICAEW Chartered Accountants who are engaged in the kinds of schemes highlighted in The Times need to look at themselves in the mirror and ask – am I upholding the honour and reputation of ICAEW Chartered Accountants and am I seen to be doing that? If the answer is no then they need to ask themselves whether they want to belong to our profession or not? …”
Strong words indeed! The trouble is that ‘the kinds of schemes highlighted in The Times’ is a rather careless assembly of words for so esteemed a commentator. The biggest player in the market of tax avoidance schemes wasn’t even mentioned in The Times articles. That might be because they regard their tax planning as ‘commercially driven’ and ‘clearly distinguishable from contrived artificial planning’. The point is, tarring all purveyors of tax avoidance schemes in this way ignores the fact that there are many different reasons why taxpayers might enter into what HM Revenue & Customs regard as tax planning arrangements. Those providers whose planning is provided with something of ‘a nod and a wink’ – with no intention of doing anything other than mitigating tax – are arguably susceptible to Michael Izza’s damnation. Even then, some might raise an eyebrow at the fact that
the ‘honour and reputation’ of accountants who alert their clients to loopholes in legislation – which the government themselves were responsible for drafting badly – has been brought so provocatively into the public domain.
However – and here is the important bit – those tax planning providers cannot, and should not, be bracketed with strategists who generate a tax saving as a by-product of implementing a commercially-driven planning solution for the owner-managed business community. Even Michael Izza has now backtracked somewhat, and this week has said that: “… as a profession, we don’t necessarily agree on what the boundaries are or indeed where the line should be drawn between legitimate tax planning and aggressive avoidance …” And therein lies the problem. After all, it is well-known that a leading House of Lords tax case from 1936 concerning the then Duke of Westminster held that: –
“Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax …”
Finally, it is worth observing that there had been a fair amount of media speculation that the imminent publication of this latest consultation document would bring about something of public ‘naming and shaming’ of users. In the event, the consultation document makes no such attempt – and, notwithstanding The Times’ approach, it is hard to imagine how the government ever could, given the fundamental concepts of taxpayer confidentiality.
NOTE: The consultation processes will run until 14th September 2012 and 15th October 2012 respectively.
