In HMRC's draft charter, the following phrase is used:
"Pursue relentlessly those that break or bend the rules".
What precisely constitutes, in HMRC's eyes, "bending the rules"?
"Bending" could easily be interpreted as "tax planning".
Does this mean that tax avoidance, which is perfectly legal, is now being made illegal via the backdoor (the charter will have the force of law behind it)?
Tax does have to be taxing.
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Oh please! The state of State education has been such for years that nobody understands the difference between "avoidance" and "evasion" any more anyway.
ReplyDeleteIt iz dat it iz phar to suttle innit man, yeah. Wurd to yah muvva.
Just cough up and be appropriately grateful that HMRC staff don't (yet) routinely carry tasers.
Anyway, your reluctance to pay is puzzling. What's the problem? It all goes to a good, efficient, cause anyway ...
Hehe. I can see that you've not been following the Gruaniad's series over the last couple of weeks, Ken.
ReplyDeleteIt's not rocket science, mate, but the problem is that the phrase "avoidance is legal", while true, is a bit of an over-simplification. The fact that attempting to avoid tax is legal doesn't mean that the scheme you use works. Let's look at an (admittedly ridiculous) example.
I've got a business selling, say, cookery books and utensils, from which my profits are £100k. However, rather than putting this figure in the "income from trade or profession" box, I leave it blank. Meanwhile, I write in the "any other information" box something along the lines of "not included above is £100k of income from my trade of selling blah blah." Because of this note, it's pretty hard for me to be accused of evasion; I've not lied and there's no element of "sham". Technically, this is a really bad avoidance scheme and I'll just hope that HMRC doesn't pick up on it.
What I've done is legal, but the revenue will (assuming they haven't lost my return) very quickly have a word with me and I'll have to pay what's due. By enquiring, they would be pursuing me for having bent the rules.
A large avoidance scheme will tend to be somewhat more sophisticated. If my company implements a scheme which exploits a loophole created by the interaction of three different pieces of legislation with common law principles by leasing platinum sponge from a Cayman Island partnership whose partner is a Delaware company set up by my Jersey-based tax adviser, HMRC will probably take a closer look (i.e. pursuing me for bending the rules!). Fortunately for me, my adviser has been so clever that the loopholes have indeed been exploited properly and HMRC can't find any way of attacking the scheme that will stand up in court. In this case, HMRC may choose to let me off with it but change the legislation to close the loophole so that neither I nor anyone else can use the same wheeze the following year. In other words, they're once again pursuing those that are bending the rules, or who intend to.
Now setting someone right who unsuccessfully implements a scheme, or closing a loophole do not stop avoiding tax being illegal. What you've come up with is a straw man argument by implying that tackling avoidance necessarily means trying to make avoidance itself illegal (though some would argue that it should be - just see the Guardian website!). Would you rather that HMRC did not investigate multi-billion pound corporate avoidance schemes and just let those of us who don't have any choice but to pay tax via pay as you earn get ripped off?
Finally, before you start making noises about how using an ISA or your personal allowance is avoidance: it isn't! In the past I've cited judicial decisions on this point. Here, I don't need to as the charter says it all with the phrase "bend the rules". There is no sense in which using an ISA or personal allowance as intended (we'll set aside Arctic Systems etc for the time being!) could be described as bending the rules!