The committee found that HMRC’s approach does not appear to discriminate effectively between the full range of behaviours and circumstances it describes as tax avoidance. They believe, along with many others, that there is a clear difference in culpability, for example, between deliberate and contrived tax avoidance by sophisticated, high-income individuals, and uninformed or naive decisions by unrepresented taxpayers.
High penalties, designed to deter taxpayers from appealing, are a tax on justice, the committee claimed and clearer distinctions are needed in the Government’s approach and rhetoric towards tax avoidance.
The committee calls for the oversight of HMRC and its powers to be reviewed. The report also recommends that consideration should be given to widening the remit of the Adjudicator’s Office, and to oblige HMRC to follow its recommendations. The committee has also recommended that Parliament considers how it can improve the scrutiny of the powers being given to HMRC and how it uses those powers.
The committee considered a number of specific areas where it considers HMRC’s powers and behaviours need review. These came under the headings of:
- Proposed new power: offshore time limits
- Proposed new power: civil information powers
- The 2019 loan charge
- Taxpayer safeguards and access to justice
- The tax policy process
- HMRC’s changing culture
- Powers Review principles revisited
- HMRC’s powers and accountability
The committee specifically recommended that HMRC should urgently review all loan charge cases where the only remaining consideration is the individual’s ability to pay, and establish a dedicated helpline to give those affected by the loan charge advice and support. It said action should take place “well in advance” of the loan charge coming into effect in April 2019.
The committee has also recommended that Parliament considers how it can improve the scrutiny of the powers being given to HMRC and oversight of how it carries out those powers. Other report findings and recommendations include:
- The government should withdraw clauses 79 and 80 of the Finance Bill, which would extend HMRC time limits to assess offshore matters to 12 years
- The government should withdraw its proposal, for which consultation closed in October, to remove oversight of the tax tribunal from HMRC access to information about taxpayers from third parties
- Penalties associated with General Anti-Abuse Rule and Follower Notices restrict access to justice, and should be abolished
- The government should legislate to give the First-tier Tribunal (Tax) the power to conduct judicial reviews.
- The Treasury should assess whether HMRC is adequately resourced to fulfil its Charter obligations in the next Spending Review.
HMRC has pushed back on the committee findings and recommendations saying that:
“We’ve taken unprecedented action to crack down on avoidance and evasion, making sure people pay their fair share of tax and securing funding for our vital public services.
“Parliament has given HMRC powers it needs to tackle businesses and individuals who do not pay their fair share, and it uses them responsibly and subject to appropriate checks and balances.
“On the loan charge in particular, it is important to bear in mind that disguised remuneration schemes are aggressive tax avoidance structures that allowed some people to avoid the taxes that Parliament requires them to pay.”
You can read the full report The Powers of HMRC: Treating Taxpayers Fairly here. The Bedrock team is working with a significant number of clients seeking settlement in relation to the 2019 loan charge to help them pay the right about of tax and negotiate ‘time to pay’ arrangements with HMRC. We are also assisting accountants and their clients to manage disclosures and disputes with HMRC on a range of tax related issues. Why not get in touch and discuss how we may be able to work with you.