Monday, October 06, 2014


BLOG 155

Marie moved to the UK from France in 2004.  At the time she took tax advice from HMRC and was told that she did not have to declare her French income provided she does not bring it into the UK.  Marie has accordingly never declared that income.  She did not know that the law changed in 2008 and that she now has to pay UK tax on such income unless she pays a fee of £30,000 p.a. to HMRC.  Do you think that Marie should go to jail?

Sarah is a nurse working for the NHS.  She lives frugally and manages to send £100 a week home to her mother in Jamaica.  Her mother puts these funds on bank deposit in Sarah’s name so that Sarah has some savings when she returns home.  Sarah has not given a thought to the possibility that the interest building up in Jamaica might be taxable in the UK.  Do you think that Sarah should go to jail?

Chrissie came to the UK from the USA in 2000.  Two years ago, her father in America put $200,000 into an interest-in-possession settlement for Chrissie’s benefit.  Chrissie is technically entitled to the income as it arises but her father has not told him that the settlement exists because he does not want Chrissie to spend the money recklessly.  Do you think that Chrissie should go to jail?

Denise moved from Switzerland to the UK in 2010.  She discussed her UK tax position with CBW Tax, who told her that they consider that she is domiciled in Switzerland and that she did not need to put her unremitted overseas income on her UK tax returns.  HMRC have challenged Denise’s domicile status.  She does not think that the UK tax on her overseas income justifies the costs of arguing with HMRC and has accepted their view.  Do you think that Denise should go to jail?

Fiona lives in Monaco.  She believes that she is resident in Monaco and is not a resident of the UK.  She has accordingly not completed a tax return here.  HMRC disagree.  They think that Fiona has misinterpreted our complex residence rules.  Eventually she has agreed that they are right.  Do you think that Fiona should go to jail?

Georgina is a beneficiary of a US trust fund.  She declares the income each year on her UK tax return.  In 2012/13 the trustee accidentally transposed one of the figures so she under-declared the income by £2,500.  Do you think that Georgina should go to jail?

Harriett is a partner in an overseas investment partnership.  She received a distribution in 2012/13 which the partnership told her was a capital gain.  She declared it as a capital gain on her tax return.  While it is a gain under US rules, it is income under UK rules.  Do you think that Harriett should go to jail?

Jennie stays in her holiday home in Florida for a couple of months each year.  She has a bank deposit account in Florida as she wants to keep funds there to meet her US expenses.  She declares the interest on her UK tax return.  She somehow overlooked the account when doing her 2012/13 return even though she declared it in both 2011/12 and 2013/14.  Do you think that Jennie should go to jail?

George Osborne thinks that they should all go to jail!  I assume that David Cameron and Nick Clegg think so too, as I can’t imagine that they have given George freedom to imprison whoever he likes without consulting them first.

So why does Nick Clegg want to send Marie, Sarah, Chrissie, Denise, Fiona, Georgina and Jennie to jail?  I don’t know.  I think it an extraordinary thing to do!  I do know why George Osborne wants to send them to jail, but do not have the faintest idea why Nick and Dave would have countenanced his scheme for one minute.

George is concerned about tax evaders.  He thinks that people who evade tax should go to jail.  So do I.  I imagine that Nick and Dave do too.  HMRC have told George that it is hard for them to prove that people put money overseas in order to evade UK tax.  It is also of course expensive for HMRC to gather the evidence needed to get a conviction.  George’s big idea is that there should be a new criminal offence of “failing to declare taxable income and gains arising offshore”.  It then becomes easy to send tax evaders to jail.  There are only two things HMRC need to prove; namely that the individual received taxable income and that it was not shown on his tax return.  That way no tax evader will be able to escape jail.

It’s a shame about Marie, Sarah, Chrissie, Denise, Fiona, Georgina and Jennie.  But George, and Nick and Dave (I assume), think it better that seven innocent women go to jail than that one tax evader escapes his just deserts. 

These poor women are not accidentally caught.  They are deliberately to be criminalised.  The offence is a strict offence.  Misunderstanding the law, not knowing about the income, making mistakes, taking advice from HMRC that turns out to be incorrect, making a judgement to the best of your belief, etc are all irrelevant.  You have income.  It’s not shown on your tax return.  Go to jail.

I’m not a political person.  Over the years I have voted for all of the three main parties at some time.  I like to think of myself as a liberal.  I believe in the apparently old-fashioned concept that it is better for seven guilty men to escape jail than for one innocent person to be sent to jail.  I thought that Nick Clegg was a liberal too, but it seems that Liberal with a Large L is very different from liberal with a small one, and that freedom of the individual doesn’t count for much with Nick.

Of course, I don’t really think that Nick and Dave are wondering how to raise the funds for a new wing at Holloway to house Marie, Sarah, Chrissie, Denise, Fiona, Georgina and Jennie.  I doubt that the Director of Public Prosecutions will take criminal proceedings against any of them.  But that ought not to absolve Nick for blessing George’s scheme.  I think it fundamentally wrong to label any of the above ladies as a criminal.  They are all people who have done their best to comply with the law but, for one reason or another, their best has resulted in the omission of taxable income.

I want to live in a country where everyone is bound by the rule of law but otherwise has the freedom to live their lives as they wish.  The Nick and George system under which it is up to an HMRC official or the DPP to decide whether an innocent person should nevertheless be sent to jail is anathema to me.  That is what happens in a dictatorship.  I hope that when you come to cast your vote next May, you will think hard about whether it is really what you want!



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