HOW OFTEN DO HMRC MEAN WHAT THEY SAY?

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HOW OFTEN DO HMRC MEAN WHAT THEY SAY?

“When I use a word”, Humpty Dumpty said, in a rather scornful tone” “it means just what I choose it to mean – neither more nor less”.  “The question is”, said Alice, “whether you can make words mean so many different things”.    “The question is”, said Humpty Dumpty, “which is to be master – that’s all”.

Im a fan of Lewis Carroll.  It appears that Jane Ellison, the new Minister responsible for HMRC must be too (or if she is not, someone within HMRC must have taken Humpty Dumpty to heart).

HMRC issued a guidance note on 29 September, “HMRC’s guide to getting out of a tax avoidance scheme”.  This tells me that “HM Revenue & Customs (HMRC) has dedicated teams who can help you in a clear and straightforward way to settle your affairs and won’t charge you for their advice, even if you’ve several avoidance schemes”.

It strikes me as Lewis Carroll-esque to define “HM Revenue and Customs” as HMRC the third time that HMRC is used in the notes instead of the first time, as other people would have done.  But that is not what interests me.  It is that concept of free advice, or indeed of HMRC giving advice at all.  Imagine the phone call:

Taxpayer:        I have entered into a tax scheme and understand that you give free advice.

HMRC:             Yes, indeed.

Taxpayer:        I assume this is impartial advice.

HMRC:             Yes indeed.  There are a lot of laws to protect consumers from biased advice and as part of the government we lean over backwards to be unbiased.

Taxpayer:        I have entered into a tax avoidance scheme and keep reading in the press that HMRC thinks that most such schemes don’t work so I am getting a bit worried.

HMRC:             Tell me about the scheme.

Taxpayer outlines the scheme.

HMRC:             I’ve not heard of that scheme before.  If the promoter thinks it works, it obviously might well do so.  You’d be a fool not to sit tight and wait for us to attack it.

Taxpayer:        That sounds good advice to me.  Will you write and confirm it like my accountant always does.

HMRC:             No, this is free advice, so we do not have the resources to do that but I’ll keep a note of the advice I gave you”.

Sadly I think that word “advice” is not intended to carry its ordinary meaning.  HMRC have always had a policy of not advising on what they perceive to be tax avoidance schemes, and I doubt that they have changed their stance.  I suspect that they regard “advice” as a Humpty Dumpty word and all that they intend to do is tell people how to pay the tax if the taxpayer has already decided to concede that his scheme will not work.  That is not advice; it is information.

The previous day, HMRC issued a consultation document, “Consultation on a new penalty for participating in VAT fraud”.  That is a Humpty Dumpty title though.  What Ms Ellison actually wants to do is to introduce a special penalty for people who do not themselves participate in VAT fraud but do not notice that their customers or suppliers are fraudsters.  This is a penalty aimed at those who HMRC think “ought to have known” about a fraud.

Do you know if your window cleaner accounts for VAT or if he is operating wholly or partly in the black economy?  And how about the chap who did a bit of electrical work for you?  It cost so much that he is probably over the VAT limit if he earns that much every day.  Well the idea is that you should be penalised if HMRC think that you ought to have known such people are evading VAT.

You will have done nothing wrong.  There is no obligation on you to tell HMRC if you suspect someone of fraud.  You might think, “Am I my brother’s keeper?” (That is not from Alice Through the Looking Glass.  It’s from the bible.  It was spoken by a criminal seeking to cover his tracks).  But it is not criminals that Ms Ellison ‘s new penalty is aimed at.  It is innocent bystanders.  (That’s a bit of an exaggeration because HMRC’s view appears to be that if you ought to have known about a fraud, you are probably involved in the fraud and have duped the tax appeals Tribunal into believing that you weren’t.  In other words, their starting point is that you shouldn’t be allowed to get away with fraud merely because they cannot produce sufficient evidence to show that you are a fraudster).

My father was German.  My mother used to tell the story that they visited my Dad’s mother at her home in Heilbronn (a small town in Southern Germany) in around 1937 and after she had been there a few days Granny received a knock on the door.  It was a couple of police who showed her a photo of Mum coming away from shopping in Woolworths.  They told Granny that she would be in deep trouble if she did not stop her daughter-in-law from shopping in Jewish stores.  That is the sort of society that a special penalty on those who ought to have known conveys to me.

That’s not the sort of society I want to be part of.  How about you?

ROBERT MAAS