Reply to: The next step

[AtW]

One thing to bear in mind is that this is not criminal law, it's civil law. No-one did anything wrong, and no-one is suggesting they did. HMRC are just simply trying to correct their tax returns (in their opinion).

Indeed.

They are not bad people, just imagine if I was running HMRC

[LisaContractorUmbrella]

Given the demographics of the Commons these days I really couldn't see anything that attacks the use of trusts getting too far , most of them are trust fund babies after all

Unfortunately, regardless of the demographics, none of them will stand up against anything that is seen to be done in the interests of 'fairness'

[BlasterBates]

One thing to bear in mind is that this is not criminal law, it's civil law. No-one did anything wrong, and no-one is suggesting they did. HMRC are just simply trying to correct their tax returns (in their opinion).

[AtW]

You are still confusing the current Human Rights litigation with the original law challenge (which never happened).

I was referring specifically to "Huitson -v- HMRC" which I believe was the name of the recent case lost in CoA.

[normalbloke]

Maybe Huitson should have thought about longer term consequences of losing in court before trying to challenge HMRC.

You are still confusing the current Human Rights litigation with the original law challenge (which never happened). Huitson et al were saying 'Bring on the Commissioners' in 2001,2,3,4,5,6,7, as they felt HMRC had no legal challenge to the original legislation, despite regular letters saying they did. The overriding impression is that thy couldn't win, so they mislead Parliament into changing the law. Nice.

P.S. Its easy to successfully challenge any return if you change the law retrospectively. So, anyone over your 10K threshold would then go to prison. Hah! Even nicer!

[AtW]

So you would put people in prison for not breaking a law as it stood then?

No.

What I'd do is that in cases when tax return is successfully challenged and amount of unpaid tax exceeds set threshold (say £10k per year) without really good reason, then it would be classed as tax evasion and jail terms would apply. The bigger the difference between rate at which tax should have been paid and actual paid (say 40% vs 3.5% as an example) the longer jail sentences to discourage "aggressive tax planning".

HMRC will still need to challenge successfully return, meaning going to court if necessary but if you lose there and amounts at questions are very substantial then those who pursued this court of action should not get away with just interest.

Of course none of this is likely to happen ever in this country, that I concede.

Instead what you get is very mild attempts by HMRC to increase cost of stalling tax payments due, that sure beats having to paint Jacqui Smith's house?

[normalbloke]

They are not dodging it though, they are winning nicely so far in courts and the main problem is that endless appeals trying to prove Black is White actually stall payouts: interest that they currently charge isn't enough to deter such behavior. Hence anti-stalling legislation to increase cost of such action to beat cynical people who'd prefer to appeal and appeal despite being clearly in the wrong.

You can still challenge them in courts, it's just stalling tactics will cost you more in the future which is (in my view) their proposal is all about. I'd take much harsher approach (long jail sentences) if I was tasked with making sure tax dodgers pay the full whack + a lot more on top to deter others, would not you if you had that job?

btw I think taxes are way too high and I'd prefer to pay a lot less than I have to at the moment - it's just I am for tax rates to be reduced for everyone rather than have some people use loopholes to cut down their tax at the expense of others. It's politicians who decide what tax rates are, not HMRC who are just trying to enforce policy.

Point of information here. They may be winning the Human Rights issue (at the moment) which is what the current litigation is all about. It isn't about the law as it stood then. HMRC dodged the courts concerning the actual loophole in the law itself for 7 years.... Why would people affected take HMRC to court when HMRC kept promising they themselves would put test cases before the commissioners? The fact the legal arguments they came up with over those 7 years were nonsense (eg Archer v Baker-Shee) meant everyone was continually waiting for them to come up with a successful challenge. They didn't (or more likely couldn't), hence them getting retrospective change in that law.

So you would put people in prison for not breaking a law as it stood then? No one as yet has proved that any law was broken until it was retrospectively changed. You really are in the wrong country, aren't you.

[AtW]

The Government could then introduce retrospective legislation without any fear of judicial scrutiny.

Maybe Huitson should have thought about longer term consequences of losing in court before trying to challenge HMRC.

[DonkeyRhubarb]

Presumably the listing idea is so that HMR&C can get their 'opinion' on the scheme into law and then take their time pursuing users and purveyors knowing that chances are anyone caught would cough up straight away rather than risk retrospective repayment. I suppose they also think that the list will act as a deterrent.

Retrospective legislation trumps any listing.

The Court of Appeal ruled on the basis that the purpose of the scheme was to obtain a tax advantage and that it misused legislation in a way that was not intended, and it was therefore in the public interest to legislate with retrospective effect.

The ruling could therefore be used to justify closing any tax avoidance scheme with retrospective effect.

Surely, if BN66 was in the public interest, it would be in the public interest to apply the same treatment to all tax avoidance schemes.

If the Supreme Court upholds the CoA it would be pointless for promoters of other schemes to challenge retrospection legislation in the courts on human rights grounds.

The Government could then introduce retrospective legislation without any fear of judicial scrutiny.

[geoff from contracta IOM]

Given the demographics of the Commons these days I really couldn't see anything that attacks the use of trusts getting too far , most of them are trust fund babies after all

[LisaContractorUmbrella]

Here's a question.

Why bother with all this listing rigmarole when "Huitson -v- HMRC" gives backing for retrospective legislation?

Why risk litigation at all? Who cares whether HMRC believes something doesn't work, just close it down retrospectively.

If the Supreme Court upholds the CoA, then why would the Government not use it to close all of these schemes instead of fannying around?

Presumably the listing idea is so that HMR&C can get their 'opinion' on the scheme into law and then take their time pursuing users and purveyors knowing that chances are anyone caught would cough up straight away rather than risk retrospective repayment. I suppose they also think that the list will act as a deterrent.

[DonkeyRhubarb]

Here's a question.

Why bother with all this listing rigmarole when "Huitson -v- HMRC" gives backing for retrospective legislation?

Why risk litigation at all? Who cares whether HMRC believes something doesn't work, just close it down retrospectively.

If the Supreme Court upholds the CoA, then why would the Government not use it to close all of these schemes instead of fannying around?

[LisaContractorUmbrella]

More info on the "listing" idea and it seems as though this idea will not just apply to income tax:

The concept of listing a scheme already exists in UK tax law as part of the VAT Disclosure Regime (VDR). Details of the relevant VAT legislation are in Annexe B. The main features of VAT listed schemes are:
 They are in essence descriptions of known VAT avoidance schemes;
Listing is done by Treasury order subject to affirmative resolution, which ensures that the order is debated by Parliament;
The order allocates a number to each scheme listed;
The consequence of listing is that a business (with a turnover of at least £600,000) that uses a listed scheme must report that use to HMRC using the number allocated to the scheme;
There is a penalty for failure to report a listed scheme of 15% of the tax advantage sought.

3.3 The significance of VAT listed schemes for the present consultation is that they demonstrate that:
 Avoidance schemes can be described in legislation in sufficient detail to narrowly target the avoidance;
 Obligations and consequences can be attached to the use of listed schemes; and
 Listing can be an effective means of countering avoidance.


Listing

The taxes to be included
3.4 The proposal is to be able to list a scheme in relation to any tax for which an avoidance disclosure regime already exists. Those taxes are:
 Income Tax;
 Capital Gains Tax (CGT);
 Corporation Tax (CT);
 Stamp Duty Land Tax (SDLT);
 Inheritance Tax (IHT); and
 VAT

3.5 The ability to list a scheme should also include National Insurance Contributions (NICs). Separate NICs legislation provides a NICs disclosure regime that mirrors the income tax disclosure rules.

[BlasterBates]

It depends on how HMRC interpret a scheme. There is a difference between a trust where the money stays invested and is spent on the upkeep of a Stately Home, and a trust where all the money coming in goes straight out as a loan, that's never repaid.

We'll have to wait and see, but I could well imagine that a trust that is used for the upkeep of a stately home might not be treated as "artificial".

[geoff from contracta IOM]

I think the "HMR&C believe.........." is a fairly telling phrase Geoff Their intention seems to be to close every possible loophole in one foul swoop

The whole basis of how trusts came into being was to stop greedy authorities introducing punitive taxes upon someones death that resulted in the state rather than their beneficiares receiving the fruits of their lifes work. It was the sort of actions that we are seeing now that brought about this situation in the first place, clearly they never learn.