BN66 - Time to fight back (Chapter 3)

[Friendly Accountant]

Would you really want to be a lawyer for HMRC making this argument?

Dear Mr Ratican
Thank you for your e-mail of ** August to the Financial Secretary and your e mail of ** September to the Chancellor. I am replying as a member of the responsible team in HM Revenue and Customs.
You are concerned about the retrospective nature of section 58 and the impact on your financial position.
As the Financial Secretary indicated during the Parliamentary debate on the Finance Bill, section 58 counters a tax avoidance scheme that purported to thwart the object and purpose of the UK’s double taxation treaties, as well as retrospective legislation that had been introduced in 1987 to counter misuse of the UK’s double taxation treaties.
The Government does not accept that the scheme achieved its purpose since the 1987 legislation clearly applied to it. However, during 2007 both the number of scheme users and the amounts of tax involved reached such a high level that the Government decided that a legislative response was appropriate. By retrospectively clarifying the 1987 legislation, section 58 removes any doubt that this type of avoidance scheme does not work and never has done.
Retrospective legislation is very rare and the Government has confirmed that it will use it only for the worst cases of avoidance where it is appropriate to ensure fairness and certainty for all taxpayers. This is an exceptional case and the Government is satisfied that section 58 is fully compliant with the Human Rights Act.
Where taxpayers have difficulty meeting their obligations, HMRC has established procedures and guidelines which can be found at http://www.hmrc.gov.uk/howtopay/prob-indiv-comp.htm. In addition, in a letter of 22 July from HMRC you were given details of two contact names and phone numbers with whom you can discuss in detail any concerns you may have about your particular circumstances.
I hope that you will find this reply helpful.
Yours sincerely
Name Removed
[FONT='Calibri','sans-serif']CT & VAT (100 Parliament St)[/FONT]

"The Government does not accept that the scheme achieved its purpose since the 1987 legislation clearly applied to it........."

"By retrospectively clarifying the 1987 legislation,...."

So..... to paraphrase....The legislation clearly applied to the scheme, so we decided to clarify it!?!

"Retrospective legislation is very rare and the Government has confirmed that it will use it only for the worst cases of avoidance where it is appropriate to ensure fairness and certainty for all taxpayers."

So amending legislation 20 years after the fact is intended to provide taxpayers with MORE certainty over their affairs??


C'mon, admit it Ratican....you made this up, didn't you?

[PlaneSailing]

Response from the Government

I want to back the Govt into a corner. By making the following allegation, I am hoping to give them little room for manoeuvre.

Both Committees specifically asked how long and to what extent HMRC had been aware of the scheme but at no point did the Government disclose any details of HMRC's ongoing investigation.

I hereby allege that the Government withheld details of HMRC’s investigation, which the Committees should have been made aware of, in order to make the use of retrospection appear more legitimate.

It is a matter of written record that the Committees were not told any details of HMRC's investigation, so the only possible responses are:

1) HMRC didn't tell the Govt and the Govt didn't bother to ask

2) The Govt asked HMRC but HMRC fobbed them off with a load of BS

3) HMRC did inform the Govt but the Govt didn't think the Committees needed to know

none of which are acceptable.

DR,

Before you write your letter it may be worth having a look at this:

http://www.publications.parliament.u.../689/68904.htm

Towards the bottom of the page the Government respond with their
timings. I'm still not sure why, if they knew about this in 2001, then why
not do something about it then!

[WavesAtPlay]

Concern over loans

Have been following discussions (lurking) for last couple of months.
Thanks for all the useful information and advice.

I have been with MP for 5/6 years and now using their Loan scheme. I have received no CNs yet and don't have any CTDs or similar. Received SA Tax Return from MP a few days ago.

One colleague at work was with Steed who he says have applied for a JR.

A bit concerned about the MP Loans scheme as I have just come across:

http://www.taxationweb.co.uk/tax-new...s-blocked.html
and
http://www.hmrc.gov.uk/news/pta-technote.htm

Does anyone know whether the MP Loan scheme is affected by this legislation?

[DonkeyRhubarb]

MP letter - version 3

Still continuing to fine tune it.

===========================
Having studied the minutes of the Treasury and Finance Committee debates, it is clear that the Government were highly selective in their presentation of the facts. Both Committees specifically asked how long and to what extent HMRC had been aware of the scheme but at no point did the Government disclose any details of HMRC’s ongoing investigation. In particular, they failed to mention that:-

1. as early as 2003, HMRC had already placed many users, including myself, under investigation. The figures I have obtained from my scheme provider for the number of users under enquiry, and bear in mind that this was only one of several schemes operating at the time, are as follows:

2003 (tax year 01/02) – 200 users under enquiry
2004 (02/03) – 350 users
2005 (03/04) – 550 users

2. at the time the legislation was being debated, HMRC were already sitting on several thousand individual tax returns under enquiry

The Government claimed that the scheme was only highlighted as a serious problem in 2007, yet HMRC had been actively investigating it for 4 years prior to that, and I believe the numbers presented above speak for themselves.

It is my allegation that the Government deliberately withheld details of HMRC’s investigation into the scheme from the Committees, in order to (a) cover up HMRC’s failure to act sooner and (b) make the use of retrospection seem more justifiable.

[Emigre]

It is my allegation that the Government deliberately withheld details of HMRC’s investigation into the scheme from the Committees, in order to (a) cover up HMRC’s failure to act sooner and (b) make the use of retrospection seem more justifiable.

And, in so doing, misled Parliament.

[DonkeyRhubarb]

And, in so doing, misled Parliament.

Indeed, but no doubt they will worm their way out of it though.


PS. nevertheless I'll tag this sentence on the end for good measure.

[Toocan]

"The Government does not accept that the scheme achieved its purpose since the 1987 legislation clearly applied to it. However, during 2007 both the number of scheme users and the amounts of tax involved reached such a high level that the Government decided that a legislative response was appropriate. By retrospectively clarifying the 1987 legislation, section 58 removes any doubt that this type of avoidance scheme does not work and never has done.

..and yet there own website states that they had been told that the 1987 fix did not work and they were expecting further DTA issues. (my earlier reference to the DTA manual on HMRC website)

[Toocan]

You have asked for information about the number of users of the tax avoidance scheme concerned. Unfortunately we do not hold information in the form you have requested and the data you ask for could not be obtained without a great deal of work, the cost of which would not be reasonable.

How can Jane Kennedy claim that the number of users had increased, and yet have no idea what those number are? Perhaps you should ask for any informaiton they have on the numbers.

I suspect the truth of the matter is that the number of users was not increasing, and had even peaked years before.

[Toocan]

It might be worth stating in your letter that it is for an MP to reply, and not HMRC. This is because HMRC apply what Parliament decide, and it is Parliament that has been misled and passed a retrospecive law.

There is nothing that HMRC can say that will help - they have been at fault.

We need a reply from a MP or Treasury - but it is a political reply we need.

It would be useful to get facts from HMRC - information that supports our position.

[DonkeyRhubarb]

How can Jane Kennedy claim that the number of users had increased, and yet have no idea what those number are? Perhaps you should ask for any informaiton they have on the numbers.

I suspect the truth of the matter is that the number of users was not increasing, and had even peaked years before.

I suspect this too. Even if the numbers had reached an "unprecedented scale" by 2007, HMRC can hardly claim this was a surprise when they had been watching the trend for 4 years.