Reply to: Legal action against HMRC for lack of due care and attention

[regron]

I'm pretty sure the short answer will be 'As individuals, it is down to us to ensure our SA is in order' buck stops with us !

[Tweedle]

Both of those statements are incorrect although it may depend on when you started schemes and who the QC was.

The obligation upon advisers/users/facilitators of schemes to disclose was introduced over a period from perhaps 2006 onwards with increasing severity.

My memory tells me that if an SRN had been issued, then you were very much obliged to put it on the tax return pretty much from 2004 when the rules arrived. That is after all the point.

I'm not at my desk but can find the statutory references if I have to. A lot of this is in secondary legislation and tracking that can be time consuming.

Supposing you're right and my other advisor was wrong / I misunderstood them, why haven't HMRC or whoever is responsible for ensuring the rule about putting a DOTAS number on your tax return been in contact, or why haven't I been accused of a fraudulent SATR??? After all, HMRC know the DOTAS number and know I was in that scheme - it was only me that didn't!!
Indeed, why weren't my providers persued for not following the requirement to notify me when the scheme I was in was DOTAS registered? I never heard mention of DOTAS until 3 years ago when the first discovery assessments landed.....

[webberg]

I've been told by an "expert" , well, one of the many I've paid to try and help me wade through this mire, that there was NO obligation on the schemes to tell the participants that they had registered your scheme as DOTAS.
Also that the scheme providers accountants weren't obliged to add the DOTAS number to my SATR.
- If anyone believes either of these statements to be incorrect I'd love to hear from you.

Both of those statements are incorrect although it may depend on when you started schemes and who the QC was.

The obligation upon advisers/users/facilitators of schemes to disclose was introduced over a period from perhaps 2006 onwards with increasing severity.

My memory tells me that if an SRN had been issued, then you were very much obliged to put it on the tax return pretty much from 2004 when the rules arrived. That is after all the point.

I'm not at my desk but can find the statutory references if I have to. A lot of this is in secondary legislation and tracking that can be time consuming.

[demby]

I've never heard of Spotlights before reading this thread - what is everyone suppose to do? Trawl through the HMRC website everyday on the off chance one might be published that effects you?

And with HMRC armed with names and addresses they didn't think it a good idea to write to them directly.

[Tweedle]

And those of us that were in a scheme from '04 til the rules changed in 2010 when it was clear to me it was time to get out??

I've been told by an "expert" , well, one of the many I've paid to try and help me wade through this mire, that there was NO obligation on the schemes to tell the participants that they had registered your scheme as DOTAS.
Also that the scheme providers accountants weren't obliged to add the DOTAS number to my SATR.
- If anyone believes either of these statements to be incorrect I'd love to hear from you.

And yet it seems I'm obliged to disbelieve everything I was told by "professionals" about how compliment the scheme I joined was and I'm obliged to be able to judge a professional piece of advice and know whether it's true or not.....

I've had all these arguments with various advisors and all of them end up telling me " it's not logical, that's just how it is".
Good to see others are still going through all these arguments, I'll watch with interest to see if they progress to the same conclusion....

[webberg]

https://www.gov.uk/government/public...y-3-march-2011

https://www.gov.uk/government/public...23-august-2011

Well HMRC might also point to these in March and August 2011?

It's very grey.

[LandRover]

There is a duty of care in some limited circumstances. We've investigated and whilst there is a glimmer of a chance of making that work, frankly I'd be a fraud if I took money from people to run that argument as it's weak.

More promising is whether maladministration can lead to a claim is some harm comes from that.

Number of hurdles there.

1. What constitutes maladministration? If HMRC published a Spotlight and it's held that a taxpayer has an obligation to educate him/herself, then is there a claim? If there is, from what date? HMRC would certainly argue that the original IR35 rules were a clear signal. we might say that until Spotlight 25 (Sept 15) there was uncertainty. Arguably that uncertainty continues even now.

2. Where is the "harm"? Normally these cases depend on some financial/person injury. If HMRC eventually win the tax argument, then the only financial harm is interest and penalty. Given that we have not seen a penalty (yet) that might be hard. interest charges will be applied ONLY on final agreement, so not seen those either.

Interesting though and worth thinking about.

So what are Spotlights for? Why are they published?

For example spotlight 26 https://www.gov.uk/government/public...ood-to-be-true published 16 September 2015

So it was only by 16th Sept 2015 that HMRC deemed it appropriate to warn us all about Contractor loan schemes?

[webberg]

There is a duty of care in some limited circumstances. We've investigated and whilst there is a glimmer of a chance of making that work, frankly I'd be a fraud if I took money from people to run that argument as it's weak.

More promising is whether maladministration can lead to a claim is some harm comes from that.

Number of hurdles there.

1. What constitutes maladministration? If HMRC published a Spotlight and it's held that a taxpayer has an obligation to educate him/herself, then is there a claim? If there is, from what date? HMRC would certainly argue that the original IR35 rules were a clear signal. we might say that until Spotlight 25 (Sept 15) there was uncertainty. Arguably that uncertainty continues even now.

2. Where is the "harm"? Normally these cases depend on some financial/person injury. If HMRC eventually win the tax argument, then the only financial harm is interest and penalty. Given that we have not seen a penalty (yet) that might be hard. interest charges will be applied ONLY on final agreement, so not seen those either.

Interesting though and worth thinking about.

[LisaContractorUmbrella]

HMRC owe no duty of care to any tax payer whether they are a human or other legal entity. It's been tested in the courts.

Well, actually......http://www.taxjournal.com/tj/article...gligence-20982 Not sure if this case went to the HOL but, at this stage, it was found that HMRC had a duty of care in certain circumstances

[SueEllen]

HMRC owe no duty of care to any tax payer whether they are a human or other legal entity. It's been tested in the courts.

[LandRover]

Arriving late on the scene, I would agree with most of the responses above.

HMRC does publish their views on Contractor schemes (the latest Sept 15) and have changed the law for contractors regularly since 1999.

The key word in our tax system is SELF as in self assessment.

HMG writes the rules and expect the people who voted them in, to follow the rules.

HMRC's job is to administer the rules. It's not their job to ensure that everybody follows the rules.

Is it not the case that HMRC being the adminstrators have performed their duties inadequately?

Where were the warning letters(spotlights) being sent to people on these schemes? Why did they allow people to continue without any warnings?

Surely on publishing the Spotlight then that is the date when they could say that people were warned and action should have been from this point onwards?

There is a human rights and "due care argument" to be made. Any reasonable judge who looked at HMRC lack of actions over many many years would question the ethics and due care taken?

[webberg]

Arriving late on the scene, I would agree with most of the responses above.

HMRC does publish their views on Contractor schemes (the latest Sept 15) and have changed the law for contractors regularly since 1999.

The key word in our tax system is SELF as in self assessment.

HMG writes the rules and expect the people who voted them in, to follow the rules.

HMRC's job is to administer the rules. It's not their job to ensure that everybody follows the rules.

[handyandy]

True - although I think it's an excuse they'll keep using for a while yet.

[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.

[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.