HMRC accused of hypocrisy over tax avoidance stance

Pinsent Masons has accused HM Revenue & Customs (HMRC) of hypocrisy over its recent approach to tax planning and avoidance.
Fiona Fernie, a partner at the law firm, said many of the government department’s investigations of late had been politically motivated, “concentrating on the best soundbites for ministers”.

Tax avoidance schemes, often those involved in funding British film-making, have come under particular scrutiny, with Pinsent Masons representing more than 80 claimants who won the right to appeal a decision made by HMRC.

In December, the High Court granted Ingenious Media Film partnership investors a court date, expected to be towards the end of 2016, dismissing their judicial review challenge against the issuance of Partner Payment Notices.

These notices are similar to accelerated payment notices (APNs), but are used where a notice is given to a member of a partnership or a LLP.

Ms Fernie called APNs a “game changer” for the government, questioning the fairness of often bankrupting businesses before they can make a challenge in court.

The APNs were introduced in July 2014, allowing HMRC to demand that disputed tax associated with a tax avoidance scheme be paid upfront, before a tribunal or court has decided whether or not a scheme is effective.

By October that year, HMRC had sent notices to tax avoidance scheme users to pay more than £250m of disputed tax under the accelerated payments regime.

HMRC is moving towards being more of a regulator than a tax collector. Paul Noble
At the end of July 2015, a challenge to the legality of the notices was rejected in court, with the Government stating it expected to issue around 64,000 notices by the end of 2016, bringing forward £5.5bn in payments for the Treasury by March 2020.

“I accept that some film schemes have pushed the envelope, but I have little time for the moral argument that they are ‘not within the spirit of the law’ – if you don’t like the law, then change it, shut the loophole; there is a chance every year in the Finance Bill,” Ms Fernie said.

Her colleague and tax director at the firm, Paul Noble, also questioned the fairness of judging decisions people had made several years ago against current opinion, arguing that HMRC was now looking to mete out punishment, rather than reach a settlement.

“HMRC is moving towards being more of a regulator than a tax collector. They are giving out mixed messages,” he said.

In November, the Committee of Public Accounts highlightedserious and ongoing concerns about evasion, avoidance and collection in the tax system in its latest examination of HMRC’s performance.

A report described the number of prosecutions for offshore tax evasion as “woefully inadequate” and cited HMRC’s failure to gather intelligence on losses through aggressive tax avoidance as an obstacle to improving UK tax laws.

However, Mr Noble said that from Pinsent Masons’ perspective, HMRC was doing more than it had ever done, often “overstepping the mark” in its pursuit of tax avoidance.

A spokesman for HMRC said its judgements were solely driven by the specific facts of each case.

He added: “We administer the laws fairly and objectively, stopping the small minority of taxpayers who are determined to get around the rules and place an unfair additional burden on those who aren’t.

“Our tax enquiries are either resolved in the courts or settled by agreement, but are always based on the facts and the full amount of tax due.”