Legal action against HMRC for lack of due care and attention

[Wibble1]

Are there grounds to take legal action against HMRC for lack of due care and attention with respect to making individuals aware that they might be liable for additional tax blah blah. My personal experience was that having completed self assessments for the years shown below whilst using an EBT from prover x, and having been fully transparent and paying the benefit in kind on the amount of the loans, not once was I contacted by HMRC until the dates shown below.

Return ending Apr 2009 - Notice of assessment dated Feb 2013
Return ending Apr 2010 - Notice of assessment dated Nov 2013
Return ending Apr 2011 - APN received Sept 2015

My assumption was that up until this point, HMRC by lack of contacting me with respect to these returns was more than happy to accept them and the payment of taxes made.

We all know that the dates of the assessments fall within the 4 year cut off and so behind the scenes HMRC's strategy for taking this with what we know about now must have been well up and running.

In my particular circumstance, and whilst I'm aware now, at the time I was not aware that the providers arrangements were under dotas and as a consequence I never provided any dotas number on my returns. HMRC never contacted me to make me aware that the arrangement was a dotas registered scheme and the consequence of that.

My angle here is that whilst HMRC knew what was going on it did not take what might be considered a responsible action to make individuals aware. The lack of communication from HMRC for me assumed all was correct. They did not take responsible action to safeguard taxes due on behalf of the tax payer.

So could it be argued that due care was not taken at an individuals level or indeed for a collective group of individuals that HMRC new operated via a particular employee / provider. They did not try to mitigate the problem building up and as a consequence individuals were not aware and carried on.

In my opinion, there is reasonable grounds to assume that after submitting a return that ticked the box (hey, this guy is operating through a provider and we're doing something about that covertly re taxes due) they were obliged to take up conversation with that individual and make them aware.

If it could be proved that they were irresponsible and did not follow the rules under the guidelines they operate (are they regulated) then could it be proved that they are responsible for the consequences both financially to an individual plus the impact this may have caused, break up of relationship, stress, selling off of assets, etc.

[DotasScandal]

Before webberg arrives, I'll give you the short answer: you can't sue them, as they have de facto immunity from prosecution and they do not have a duty of care to you.
(shocking, I know)
I suggest you run some searches on this forum. You'll find this has been discussed.

PS: You'd benefit from joining Big Group. These things are being discussed extensively on the BG forum.

[BrilloPad]

You make a mistake - you are tax evading scum who gets your bank account raided.
They make a mistake - its fine. They can even change things retrospectively.

HTH BISDI.

[handyandy]

Are you serious?

You were using a DOTAS registered scheme and didn't know? You may have a case for mis-representation against the provider if they didn't tell you but it was your responsibility to check the scheme you used before you signed up. The fact you failed to put the SRN on your tax return could be used by HMRC to argue that you were either negligent or evasive in completing your return. Would you really expect HMRC to contact you to let you know you were using a dodgy scheme?

I know this might sound a little harsh but I'm surprised you signed up to something for 2009 onwards without realising the increasing level of action being taken by the government and HMRC to clamp down on the viability of any avoidance scheme.

I do understand the emotional reaction when you thought you were ok and then HMRC come after you for money you have already spent. However, they started playing hardball well before 2009 so it really is a case of caveat emptor.

So the answer to your question is a definite NO. I'm not sure it's easy to go after HMRC legally in the vast majority of cases even when there was prima facie maladministration, but in this one (from what you've posted) you have absolutely no chance.

[BrilloPad]

I do understand the emotional reaction when you thought you were ok and then HMRC come after you for money you have already spent. However, they started playing hardball well before 2009 so it really is a case of caveat emptor.

There are still people signing up to schemes even now!

[handyandy]

There are still people signing up to schemes even now!

Yep - and there are people still sending money to Nigerian princes. Caveat Emptor!

[Wibble1]

Are you serious?

You were using a DOTAS registered scheme and didn't know? You may have a case for mis-representation against the provider if they didn't tell you but it was your responsibility to check the scheme you used before you signed up. The fact you failed to put the SRN on your tax return could be used by HMRC to argue that you were either negligent or evasive in completing your return. Would you really expect HMRC to contact you to let you know you were using a dodgy scheme?

I know this might sound a little harsh but I'm surprised you signed up to something for 2009 onwards without realising the increasing level of action being taken by the government and HMRC to clamp down on the viability of any avoidance scheme.

I do understand the emotional reaction when you thought you were ok and then HMRC come after you for money you have already spent. However, they started playing hardball well before 2009 so it really is a case of caveat emptor.

So the answer to your question is a definite NO. I'm not sure it's easy to go after HMRC legally in the vast majority of cases even when there was prima facie maladministration, but in this one (from what you've posted) you have absolutely no chance.

Lets just play it out and assume that I was not aware...So that's my point. What is is that gets HMRC off the hook for not telling people that on the back of the return they believe that tax was due. The point being that if they knew that (in their view) it was due (even though to date its not been proved legally to be due else there would be no need for APN's, just demands to say your guilty, pay now) why not say, why wait until they knew that the legislation for APN's would be put in place, that legislation around EBT's was going to change so you were liable for tax.

But lets be very clea, these were not illegal and have not been found to be illegal. Have still not won any legal case that will force users of these EBT's for which APN's have been issued to pay up. There hoping to in the future and have it retrospectively applied when they do win. So you might feel quite smug thinking those that used the schemes deserved it, but did they. No. They were legal, people used them. When the rules change re tax people stopped using them. And so what it they went on to use something else that was legal. The bloody point is that it is your fricking right to be able to use these loop wholes. Why should it just be the big companies that are able to. Hindsight is a wonderful thing and I would imagine that if we had a crystal ball and knew in the end we'd be out of pocket then yes we would probably not have used them.

[handyandy]

Lot's of interesting points - let me try and unpack them and respond item by item.

Point 1 - you weren't aware. HMRC will say that's not anyones problem but yours and you should have taken professional advice if you were using a complicated scheme that you did not understand.

Point 2 - they should have told you as soon as they knew you may have a liability instead of letting you carry on thinking everything was fine. HMRC will say they have no specific duty to warn individuals and that they have carried out lots of general information campaigns. A bit like the police having now duty to tell you there is a cop car with a radar gun waiting round the corner.

Point 3 - These schemes were not illegal. That's probably the nub of the whole issue - they have not been proved to be legal or illegal yet. Lot's of QC opinions but that is not how the legal system works - it's down to HMRC to prove their cases scheme by scheme. They can't apply new legislation retrospectively (at least without that being explicitly approved by parliament) but they can argue that legislation in force at the time should be applied to these schemes in a particular way - once they set some precedents they will start to pursue more schemes where the precedent could apply. So they are trying to lay a groundwork of case law to support future challenges.

Point 4 - Wait till they knew APN's would be brought in. Not sure they did as your assessments pre-date APN legislation. However, the retrospective nature of APN's is outrageous - but that's what governments can do when public opinion (usually based on ignorance and caricatures) is on their side and they can manipulate the facts in order to refill the treasury coffers. It's not fair - life isn't!

Point 5 - you might feel quite smug. - Not really, I have two open enquiries dating back to the mid-2000's and have not heard a thing for years but fully expect they will try to come after me when they have built the case law precedents.

Point 6 - we have the right to exploit loopholes. Well, sort of as long as it does turn out to be a loophole (see point 3 above). IF it was;t a loophole then HMRC will try to prove that and say they have the right to claim back tax if the scheme fails and there was no loophole in that particular case. The reason I say 'sort of' is that the whole thrust of rhetoric and legislation over the past 5 years has been to challenge the whole concept of 'loopholes' and try to enforce tax based on the governments 'intent' (so things like GAAR and APN's are actually an attempt to tilt the scales in the government/HMRC's favour).

We may not like a lot of the above, we may think it is unethical, we may even say it is totally immoral. However, with the current state of the public finances and the fact this is largely coming from a Tory government I think there are two hopes that the direction of travel will change in the short term (and one of the hopes died some time back).

[Wibble1]

Lot's of interesting points - let me try and unpack them and respond item by item.

Point 1 - you weren't aware. HMRC will say that's not anyones problem but yours and you should have taken professional advice if you were using a complicated scheme that you did not understand.

Point 2 - they should have told you as soon as they knew you may have a liability instead of letting you carry on thinking everything was fine. HMRC will say they have no specific duty to warn individuals and that they have carried out lots of general information campaigns. A bit like the police having now duty to tell you there is a cop car with a radar gun waiting round the corner.

Point 3 - These schemes were not illegal. That's probably the nub of the whole issue - they have not been proved to be legal or illegal yet. Lot's of QC opinions but that is not how the legal system works - it's down to HMRC to prove their cases scheme by scheme. They can't apply new legislation retrospectively (at least without that being explicitly approved by parliament) but they can argue that legislation in force at the time should be applied to these schemes in a particular way - once they set some precedents they will start to pursue more schemes where the precedent could apply. So they are trying to lay a groundwork of case law to support future challenges.

Point 4 - Wait till they knew APN's would be brought in. Not sure they did as your assessments pre-date APN legislation. However, the retrospective nature of APN's is outrageous - but that's what governments can do when public opinion (usually based on ignorance and caricatures) is on their side and they can manipulate the facts in order to refill the treasury coffers. It's not fair - life isn't!

Point 5 - you might feel quite smug. - Not really, I have two open enquiries dating back to the mid-2000's and have not heard a thing for years but fully expect they will try to come after me when they have built the case law precedents.

Point 6 - we have the right to exploit loopholes. Well, sort of as long as it does turn out to be a loophole (see point 3 above). IF it was;t a loophole then HMRC will try to prove that and say they have the right to claim back tax if the scheme fails and there was no loophole in that particular case. The reason I say 'sort of' is that the whole thrust of rhetoric and legislation over the past 5 years has been to challenge the whole concept of 'loopholes' and try to enforce tax based on the governments 'intent' (so things like GAAR and APN's are actually an attempt to tilt the scales in the government/HMRC's favour).

We may not like a lot of the above, we may think it is unethical, we may even say it is totally immoral. However, with the current state of the public finances and the fact this is largely coming from a Tory government I think there are two hopes that the direction of travel will change in the short term (and one of the hopes died some time back).

All good and fair points. I get it, it do. i'm just playing devils advocate. "you may feel smug"...not a dig at you, "you" was aimed at the collective saying we've got what we deserve when actually I don;t agree.

[SueEllen]

L

We may not like a lot of the above, we may think it is unethical, we may even say it is totally immoral. However, with the current state of the public finances and the fact this is largely coming from a Tory government I think there are two hopes that the direction of travel will change in the short term (and one of the hopes died some time back).

An excuse all governments use regardless of how big tax receipts are.