Monday, November 06, 2017


BLOG 181


One of the things for which I will also remember Gordon Brown and his henchwoman, Dawn Primarolo was the politicisation of HMRC.  Prior to that you could, by and large, rely on HMRC press releases and other official publications to explain tax in a factual and honest manner.  Now HMRC seem to see one of their roles as being to preach the political messages of the government of the day.  If that makes what they say misleading or even inaccurate, the truth is subjugated to the message.

Since returning from my annual visit to Chicago at the beginning of September (happy, as the Cubs were doing well and in fact won the National Baseball League Central for the second year running, albeit they did not manage to win the National League Pennant this time round) I have been busy with books, so have rather neglected by blog.  The new edition of my Taxpayer Rights book has now hit the bookshelves and I have nearly finished the updating of my Property Tax book, so I have had a chance to catch up a bit on my technical reading.  Perhaps it is having to read several weeks of HMRC press releases together that has concentrated my mind on just how unhelpful (technically) these have become.

One example is making tax digital (MTD).  Both HMRC and the Chancellor announced that only businesses with a turnover above the VAT threshold will have to keep digital records and only for VAT purposes, and only from 2019.  They reassuringly say that the government will not wish to widen the scope of MTDFB (for business) beyond VAT before the system has been shown to work well and not before April 2020 at the earliest.  What is misleading about that?  Well, the main reason that HMRC want businesses and landlords to keep records digitally is that they believe it will improve record-keeping.  The quarterly reports they also want are likely to be fairly useless to HMRC, other than as evidence that the taxpayer is in fact maintaining digital records.  So what exactly is the difference between the digital records one needs for VAT and those one needs for income or corporation tax.  Nothing, other than that the VAT records also have to record VAT.  Accordingly not widening the scope until the system has been shown to work well is meaningless.  Everyone (except very small businesses) will be required to keep digital records from 2019, not only for VAT but for other tax purposes too, because all the records that are needed for income and corporation tax are also needed for VAT.  All that has been deferred is the final step of pushing the button to tell the computer program to send a report to HMRC.  But no-one would guess that from the HMRC PR.

Or what about employee benefit trusts (EBT).  HMRC say in a blog post of 17 August in relation to the Supreme Court decision in the Glasgow Rangers Football Club case, “The decision stated any payment made through an EBT should be considered a taxable income as opposed to a loan”.  That is very clear isn’t it?  Except it is not what the Supreme Court said at all.  What it said is that earnings from an employment is income of the employee irrespective of whether it is paid to the employee or a third party.  That means that where an EBT makes a loan, one needs to consider as a question of fact whether the payment is earnings or something else, such as a loan.  In the Rangers case, the evidence was that the money was already earnings before it went into the EBT.  But it by no means follows that any payment from an EBT is earnings.  And even where it is earnings, fascinating questions arise as to who is liable for the tax and whether HMRC may be out of time to collect it.

Then there is the “HMRC guide to tax on payments for image rights”.  This states, “Employers must ensure that all payments made to their employees comply with published guidance for the type of payment made”.  Surely not!  It must comply with the law.  We have not yet reached the stage where the law is irrelevant and we must do whatever HMRC tell us to do.  Admittedly, a lot of HMRC employees do seem to believe that we have reached that HMRC nirvana, as they keep quoting HMRC guidance to us instead of the law.  Fortunately, the Courts still believe in the rule of law.  It is also questionable whether HMRC’s assertion that a payment for the use of an individual’s image rights is taxable as professional income.  That may well be what they would like the law to be, but it is hard to see how, if CBW were to pay me to put my photo on their website (which they are obviously unlikely to do), that is not income from my asset, image rights, whereas if they pay my company to allow them to use my photo, that then magically becomes income from exploiting the image right.  I appreciate that HMRC would like the law to be different, but that cannot justify issuing guidance to ignore it.

My latest gripe is HMRC Guidance on “self-reporting” tax evasion facilitation offences”.  This is for companies to report on their own behaviour where they’ve failed to prevent the facilitation of a tax evasion offence.  Facilitating a tax evasion offence is now a crime for a company or partnership.  To commit the crime, (a) someone must have actually committed the criminal offence of evading tax, (b) that someone must work for the company (not necessarily as an employee), and (c) the company must be unable to show that it had systems in place that would have prevented the crime occurring.  As the only defence is to show you have systems in place, self-reporting seems wishful thinking.  All you can report is that you didn’t install adequate systems, i.e. you can plead guilty to the offence and hope the Courts show mercy.  Of course what HMRC really want you to tell them about is the evasion offence.  They warn you that it can be a criminal offence to volunteer incorrect information and suggest you seek legal advice before saying anything to them.  They say “only provide the information that you already have.  For your own safety, don’t try to find out more information so you can send an e-mail”.  What on earth does that mean?  Unless a person has been convicted or has admitted tax evasion, I have no way of knowing whether he has evaded tax, because one element of the crime is his thought process.  So how can I ever self-report unless I first confront the individual with my concerns?  The money laundering rules allow me to question the individual to decide whether I am suspicious that he has evaded tax, before I need to report that suspicion (albeit, once I or someone has reported it, I can no longer risk tipping him off that a report has been made).  And what does “for my own safety” mean.  I am hardly going to seek further information from someone I think is going to get violent and, although over the years I have met many people who have evaded tax (because part of what I do is to help them to confess to HMRC), I have never had a situation where I feared for my safety.  And whatever prompted HMRC to decide to allocate resources to issue non-statutory guidance on something that well-informed companies are unlikely to do and to word that guidance in such a way as to deter people from actually coming forward?  It’s good to know they have the resources to waste!



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