Queen’s Speech: Tax avoiders told to pay up front in new guilty-before-trial law
HMRC have been criticised for treating taxpayers as “guilty until proven innocent” for proposed new powers that will force suspected tax avoiders to pay up front. The plans, which were announced in the Queen’s Speech, means that individuals and businesses who use tax avoidance schemes will have to make “accelerated payments”.
This is expected to raise around £2 billion from the 65,000 people that the Treasury feel will be affected by these new powers. Most controversially are the new rules that apply to the pre-existing cases of money invested in contentious schemes from the past.
Earlier in the year, Chancellor of the Exchequer George Osborne announced plans for a major crackdown on tax avoidance after several high-profile cases. Take That singer Gary Barlow along with two band mates and the group manager now face having to repay tens of millions of pounds. They had previously invested in schemes that a judge later ruled were designed for tax avoidance.
If the plans go through, in future those accused of using such tax avoidance schemes must pay the tax while the review on whether they are legal or not takes place. Many are warning that tens of thousands of potentially innocent British citizens will be forced to pay tax bills before they are due.
In May, an all-party Treasury Select Committee expressed their concern about up-front payments. Berwin Leighton Paisner spokesman Neal Todd warned that HMRC was setting itself up as judge and jury: “We continue to have serious reservations about this. It’s causing a great deal of concern amongst clients, to be quite frank. The reason is that it gives the Revenue the power to come along to a taxpayer and ask for the money straight away.”
“That worries people. In a sense the Revenue can think of a number – obviously they have to act reasonably – but they can decide what they think the right number is. That’s very different from going to a court and them saying, ‘On balance we have decided that you owe a certain amount of money’.”
“For many people, the prospect that the Revenue can be judge and jury without going to tribunal…is very worrying and contrary to the normal rules of law and procedure.”
Tina Riches who is a national tax partner at Smith & Williamson, an accountancy and investment management group, added: “In some ways it flies in the face of the British justice system in that normally if there’s an issue you can take it court and an independent judge can decide.
“But if you’ve got to pay the income tax up front before you can get anywhere near the court you could image that people could end up just deciding to pay the tax and not pursue what is actually a legitimate case.”
Earlier this year, Chancellor Osbourne said: “If people feel they have been wronged, they can of course go to court. If they win, they get their money back with interest.”
