BN66 - Time to fight back (Chapter 3)

[WavesAtPlay]

Positive reply from MP

I've had a positive reply from my MP Mike Penning. He has written to Stephen Timms (Financial Secretary) on my behalf, as follows:

I write on behalf of a constituent to express his concerns about the provisions of the Finance Act 2008 relating to UK residents engaged in foreign partnerships.

My constituent feels that the retrospective element of the Finance Act contained within Section 58, Clause 4 will unfairly penalize his financial interests.

Prior to the enactment of this legislation my constituent states that he was able to take advantage of a scheme allowing a tax advantage for individuals engaged in foreign partnerships. It is my understanding that certain individuals engaged in foreign partnerships and making use of this scheme reached a settlement with HMRC over their tax status before the Finance Act came into law. However as my constituent was not able to reach a settlement with HMRC, he is now subject to the retrospective element of the legislation and will therefore be penalized unfairly.

I would be grateful if you could give your thoughts on this case and give any details of the mechanisms by which the Treasury settled the tax status of individuals engaged in foreign partnerships prior to the enactment of the Finance Act.

I have followed this up with the Background to Section 58 letter today.

[nolongerlurker]

nolongerlurker

Not quite sure where I lie with the press coverage bit - I can see pro's / con's for both sides. One thing for sure, it will either help or destroy the cause with no middle ground.

On another point, anyone seen the article issued today by Shout99 (copied below)-

A pledge in the new Taxpayer's Charter in which HM Revenue and Customs vows to ‘relentlessly pursue’ those who ‘bend’ the rules is far too strongly worded, as it could allow HMRC to adopt a highly aggressive stance towards taxpayers who are engaged in entirely legitimate tax planning, according to McGrigors, a commercial law firm.
The aim of the tax Charter, the first of its kind in the UK to have the force of law, is to set out the rights and responsibilities of HMRC and taxpayers in a clear and balanced way. The draft Charter is currently open for consultation for the next 12 weeks. (See: HMRC consults on draft charter - Feb 2009).

AdvertisementMcGrigors points out that it can be very unclear in practice whether the rules have been 'bent' in any given case. At one end of the spectrum are aggressive tax schemes, but the term 'bending' could easily cover planning that seems entirely normal when it takes place.
The law firm also warns that it is unclear how HMRC could ‘relentlessly pursue’ taxpayers for ‘bending’ the rules. HMRC has the right to challenge any tax return, to seek information and to satisfy itself that the return is correct. However, HMRC has legal duties from public law not to behave unreasonably. It also has no powers to impose penalties on taxpayers for arranging their affairs in ways that minimise their tax liabilities as long as they do not break any rules.

Rupert Shiers, a partner at McGrigors, said: “By definition a charter is supposed to clearly define rights and responsibilities, but this point is highly ambiguous. HMRC often sees apparently normal tax planning as ‘bending the rules’, and if Parliament approves this Charter we could see far more extensive challenges launched against innocent taxpayers.

“Everyone wants HMRC to have the power to deal with the minority of taxpayers who break the rules. But there are many more taxpayers who arrange their affairs to minimise the amount of tax they have to pay, and do so legitimately.

"The Government must not use the Taxpayer's Charter to make it practically impossible for those taxpayers to defend their position if HMRC decides, several years later, that it does not like what they have done.”

[Emigre]

Stephen Timms has been all over the press recently banging on about tax avoidance. There was a report in the papers recently about how they closed a scheme down within a matter of weeks.

So, why do you think the Treasury and HMRC have not made political capital out of Section 58 when they are usually so quick to blow their own trumpet?

Don't you think their press office would have been firing off press releases left, right and center, about the how the Govt had closed this highly abusive scheme down, if it was something they were proud of?

Section 58 was grubby and they know it.

Ah but isn't Steven Timms a rich somebody? I can see his grubby picture already. Hasn't he been involved in tax avoidance with his own funds? Or was he just "utilising the reliefs available"?
Lets have him all over the press about his own tax avoidance, rather than ours? What exactly were the commercial objectives behind his transfer of shares to his wife who never worked for the business and to his family trust? Tax planning? Tax avoidance? If we are tax cheats, so is he and in many times the size of any of us. More newsworthy I think. Oh yes, he was an IT contractor too...

[MuddyFunster]

I'm with DR on this one. Even if some papers see this as an opportunity to lay into us for being tax avoiders, that is neither here nor there. The most powerful part of any press coverage will be getting it more into the public domain and showing HMRC to be the most incompetent and deceiving bunch of ****s you'll ever deal with.

So what if those saddos reading The Sun see a piece on us in not a very complementary light. Getting a more informed piece in The Times detailing HMRCs underhanded tactics and bullying would be of huge value. More ammunition for the opposition to attack Labour on.

Just my two cents worth...

[Friendly Accountant]

I'm not sure about this

The direct objective is to:

1) To expose HMRC's maladministration in allowing the scheme to escalate for 7 years without taking any action. They have known about it since 2001, they have been investigating it since 2003, and they did a deal with another scheme in 2003. What else would you call this other than maladministration?

2) To expose the Government's abuse of power. Using the extreme force of retrospective legislation as a remedy for HMRC's maladministration is an afront to natural justice.

Even if the press don't report it this way, we can still indirectly use any publicity to raise more awareness of this in Parliament.

No matter how unfairly it is reported, it cannot hurt court proceedings which will be argued on points of law.

I am not sure if getting the press involved is the right move. I agree with your point above re: court proceedings. I don't think it is likely to impact any of the arguments to be made by MontP or any court findings.

However, I think you need to step back and consider what you want to achieve and what the risks are associated with this. You have done some excellent work in terms of getting the issues raised with MP's through the letters written etc. In my opinion, the risk here is that the press spin it against you. If they do, that is not going to make it any easier to get support from MP's, as you have been trying to do. They obviously are going to be swayed by public opinion.

I have no arguments about exposing maladministration on the part of HMRC and would agree with your points. My only concerns with this are, as others have said, these issues may just be too far below the surface to make it into print. At the risk of not giving enough credit to the general public, if I wanted to sell newspapers I think I'd be inclined to go with the "Evil tax dodging IT Contractors" story just because I think it is more likely to evoke the emotions that journalists want to evoke to sell papers.

I guess, in the end, I think the risk of a negative story outweigh the likely gains to be achieved if it does go your way. I don't think a story about HMRC incompetence is going to get a lot of MP's behind you, but I'd be concerned that a story spun the other way could drive them away.

[BrilloPad]

IMO the decision to get the papers involved or not is going to be 60/40 either way - not sure which side of the fence I sit.

But remember that once you grab the tiger by the tail it becomes impossible to control.

[deckster]

I am not sure if getting the press involved is the right move. I agree with your point above re: court proceedings. I don't think it is likely to impact any of the arguments to be made by MontP or any court findings.

However, I think you need to step back and consider what you want to achieve and what the risks are associated with this. You have done some excellent work in terms of getting the issues raised with MP's through the letters written etc. In my opinion, the risk here is that the press spin it against you. If they do, that is not going to make it any easier to get support from MP's, as you have been trying to do. They obviously are going to be swayed by public opinion.

I have no arguments about exposing maladministration on the part of HMRC and would agree with your points. My only concerns with this are, as others have said, these issues may just be too far below the surface to make it into print. At the risk of not giving enough credit to the general public, if I wanted to sell newspapers I think I'd be inclined to go with the "Evil tax dodging IT Contractors" story just because I think it is more likely to evoke the emotions that journalists want to evoke to sell papers.

I guess, in the end, I think the risk of a negative story outweigh the likely gains to be achieved if it does go your way. I don't think a story about HMRC incompetence is going to get a lot of MP's behind you, but I'd be concerned that a story spun the other way could drive them away.

An excellent post and one that perfectly articulates what I was trying to say. We don't need the general public behind us, we need MPs and the courts behind us. There is not a hope in hell of the public interpreting this story in our favour and I cannot see that wider publicity will help our cause.

At the end of the day ours is an ideological argument which should rightly concern those that make our laws, however we all know that any MP will have at least half an eye on re-election and will not publically side with causes that are unpopular with the general public.

[DonkeyRhubarb]

Hi, I was forwarded your letter to send to my MP by a colleague & fellow thread member, which I duly did and now have a reply asking for more specific info ie copies of relevant correspondance. What or how should I reply?
Thanks

Send me an email briefly outlining what's in the MP's letter and I will see if one of the followup templates would be suitable.

Thanks
DR

[DonkeyRhubarb]

Before we get too carried away

I suspect the papers will not be interested anyway. No offence but there is no-one "interesting" affected by it.

Tax avoidance is widespread in this country but it's only newsworthy when it involves footballers, celebs, the establishment, organised crime etc.

It will probably get reported when it gets into court though.

[SLB]

An excellent post and one that perfectly articulates what I was trying to say. We don't need the general public behind us, we need MPs and the courts behind us. There is not a hope in hell of the public interpreting this story in our favour and I cannot see that wider publicity will help our cause.

At the end of the day ours is an ideological argument which should rightly concern those that make our laws, however we all know that any MP will have at least half an eye on re-election and will not publically side with causes that are unpopular with the general public.

Yes, an excellent post by Friendly Accountant. We need the MP's and the courts on our side, which is something DR has done fantastically well!! I honestly believe the general public would have no support for us, no matter how the facts were presented.