Monday, May 19, 2014


BLOG 149


I have received an e-mail from edftax, who provide tax strategies (I think these are what most people call tax avoidance schemes).  They are urging people to lobby MPs to protest about the Finance Bill proposals on tackling marketed tax avoidance schemes, and in particular the proposals that HMRC should be able to require those who seek to avoid tax to put their money on the table before they can pursue an appeal, even if they entered into their tax scheme before the proposals were announced.

Edftax have surveyed their clients and have discovered that, if they have to pay the tax that they have sought to avoid (as is likely at some stage even apart from the Finance Bill proposals as HMRC are winning most tax avoidance appeals),

93.4% of their clients cannot pay the tax

99.6% believe that having to pay the tax on their past income is likely to affect investment, expansion and development plans in place for their business

68.3% will have to consider making staff redundant in order to pay their tax, which could lead to 8,000 redundancies.

82.1% say that having to pay the tax on their past income or capital gains would affect their ability to pay current tax and duties due to HMRC.

82.8% say that paying their past tax will mean delaying payments to creditors generally.

66.1% believe that having to pay the tax on their past income will force their business into insolvency.

I find these statistics astounding.  Surely a business that employs staff and makes investment and plans to expand and develop, goes into a “tax strategy” in the knowledge that it may not work.  I tell my clients, in the context not of tax avoidance but of simple planning, that nothing is certain in tax.  I cannot predict what HMRC will or will not challenge; all that I can do is to recommend a strategy that I believe will not be attacked and, if it is, the client is likely to win.  I would be astounded if my clients ignored the possibility of attack to such an extent that, if at the end of the day we were to lose, it would push their business into insolvency.  Yet two-thirds of edftax’s clients seem to have done just that.  Indeed, virtually all of their clients seem to have recklessly spent their tax money, with indifference as to whether or not their scheme worked.  I find it hard to comprehend how so many people can act so irresponsibly.

As a taxpayer, I hope that HMRC will keep a very close eye on the 4 out of 5 of edftax’s clients who believe that having to pay the tax on their past income will affect their ability to pay current tax.  HMRC surely ought to feed the edftax client list into their risk-assessment processes and ensure that such people pay their future tax liabilities promptly.

edftax are asking people to lobby their MPs to oppose the Finance Bill Clauses.  They are particularly anxious to lobby MPs on the Finance Bill Committee which is considering the proposed legislation.  The Committee Stage Hansard is pretty dull reading, so I look forward to those clauses being reached.  It will be fascinating to see which MPs are willing to support those who seek to avoid tax and the strength of the arguments that they deploy.

In Blog 136, I highlighted the Tax Avoidance Liberation Front (Westminster Branch), the Westminster 18, the 18 MPs who were petitioning the Chancellor a year ago to prevent HMRC pursuing the collection of tax from those who had entered into failed tax avoidance schemes and, like most of edftax’s clients now, had spent the money without providing for the tax.  The Westminster 18 felt that it was unreasonable for HMRC to take the same enforcement action against unsuccessful tax avoiders who had spent the tax money as they take against other people who had, for example, invested their tax money in their businesses, donated it to charity or otherwise spent their income without providing for tax.  Luckily for edftax, one of the Westminster 18, Teresa Pierce, the Labour MP for Erith and Thamesmead, is a member of this year’s Finance Bill Committee.  I accordingly suspect that they can count on her to strongly promote their case.

MPs are, presumably, referred to as honourable members because they are expected to be honourable, not hypocritical.  Teresa can hardly say that she believes that some tax avoiders who have recklessly spent their tax money should be let off their tax debts but does not believe that other tax avoiders who have done the same thing should be treated so leniently.  That would be a ridiculous position to adopt.  It would also be clearly unfair, which goes against the Labour party’s (or at least Ed Milliband’s) core values; “We cannot shrug our shoulders at injustice”.  Accordingly I cannot wait for the Committee to reach clauses 192 – 222 of the Bill.  It will be fascinating to see how Teresa presents her plea for sympathy for the tax avoider.



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