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HMRC Anti-Avoidance Plans Overzealous, CIOT Warns

by Robert Lee,, London

11 March 2014

The UK's Chartered Institute of Taxation (CIOT) has expressed concerns about plans to hand HM Revenue and Customs (HMRC) "unprecedented powers" for dealing with marketed tax avoidance schemes.

In its response to HMRC's consultations on proposed anti-avoidance initiatives, the CIOT highlighted the need to clear a backlog of court cases. The Government's reforms would link together cases which are deemed to be similar, meaning that a court ruling against one taxpayer would ensure that all "follower cases" would have to pay the tax in question straight away.

According to CIOT President Stephen Coleclough, this is not something the Government should do lightly. Instead, the change "should be regarded as an emergency measure to deal with a clearly defined set of cases and it should be time-limited." Moreover, HMRC would need to issue comprehensive guidance that clarifies what situations will be tackled in this way, he said.

Coleclough recommended that the rules "should only apply to members of the same scheme or very close variants of it. Additionally, the legislation should include a sunset clause repealing the legislation after, say, three years as the exceptional circumstances that are currently in existence should be dealt with in that time."

The CIOT is also opposed to the application of the requirement to pay tax up front to all taxpayers who are members of schemes notified to HMRC under Disclosure of Tax Avoidance Schemes (DOTAS) or General Anti-Abuse Rule (GAAR) legislation. For Coleclough, this would be tantamount to the introduction of retrospective legislation.

He elaborated: "The fact that there has been disclosure indicates an intention to be open and transparent with HMRC. In a number of cases the disclosure has been made even if the promoter or taxpayer did not believe it to be strictly necessary, 'to be on the safe side.'"

"To now introduce a retrospective change of law leading to an accelerated payment of tax is unreasonable. To extend HMRC's powers without safeguards to taxpayers who by definition have been transparent with the authority is unjustifiable. If these provisions are to come in at all then they should only apply to arrangements entered into after Finance Bill 2014 is passed."

Coleclough added that CIOT members "have expressed their deep concerns about the lack of safeguards in the proposed measures and what they see as the erosion of the principles of a fair justice system. The vast majority of tax advisers support most or all of the Government's approach to stopping aggressive tax avoidance. Pressing ahead without adequate safeguards and appeal rights runs the risk of reducing that support."

TAGS: court | compliance | tax | tax compliance | tax avoidance | tax incentives | revenue guidance | law | United Kingdom | tax authority | legislation | tax planning | HM Revenue and Customs (HMRC) | revenue statistics | tax reform | trade association | HM Revenue and Customs (HMRC) | trade

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