The professional body of senior advisers has slammed the measures, saying the approach should be viewed as an ‘emergency measure’ and only used for a limited period of time to clear a backlog of court cases say Harris & Co accountants Northampton
The institute’s comments come in response to HMRC’s consultation on Tackling Marketed Tax Avoidance and its document Raising the Stakes on Tax Avoidance. This outlines a new approach whereby cases which are deemed to have similar characteristics would be linked together in order to speed up their resolution.
CIOT described the level of responses from members to the consultation as ‘unprecedented’. It said all the feedback it received indicated ‘deep concerns’ about the lack of safeguards and the erosion of appeal rights if the rules are extended as planned.
Under the proposals, if a court ruled against one taxpayer, not only that taxpayer but all others deemed to have ‘follower cases’ would have to immediately pay the tax that HMRC believes is due. They would get the tax back if they pursued the case and ultimately won.
In using this approach the government intends to encourage taxpayers to either not pursue or to expedite cases which HMRC believes are bound to fail.
Often the cases will involve hundreds of taxpayers using the same scheme or a close variant of it from the same company.
CIOT president Stephen Coleclough said the institute had sympathy with the need for ‘robust’ action to tackle the ‘tens of thousands of outstanding mass marketed avoidance cases which are jamming up the courts’, and agreed that in some cases ‘there is undoubtedly an intention on the part of the taxpayer to delay the appeal and consequent payment of tax’.
‘However, handing HMRC almost unprecedented executive powers to decide who falls within the mischief they intend to deal with, without the usual safeguards and appeal rights, is not something which should be done lightly. It should be regarded as an emergency measure to deal with a clearly defined set of cases and it should be time-limited,’ Coleclough said.
If the proposals are given the go-ahead, CIOT wants HMRC to issue comprehensive guidance at the same time as the bill is published to show what situations are to be tackled in this way. CIOT believes the new rules should only apply to members of the same scheme or very close variants of it, and that the legislation should include a ‘sunset clause’ so it is repealed after an agreed period rather than becoming permanent. The institute suggests a three year timeframe for its use.
In its feedback, CIOT indicates it is also against a proposal to apply the same requirement to pay tax up front to all taxpayers who are members of schemes notified to HMRC under Disclosure of Tax Avoidance Schemes (DOTAS) or General Anti-Abuse Rule (GAAR) legislation. The institute is particularly opposed to the application of the accelerated payment provisions retrospectively to existing schemes disclosed under DOTAS.
Coleclough said: ‘The fact that there has been disclosure indicates an intention to be open and transparent with HMRC. In a number of cases the disclosure has been made even if the promoter or taxpayer did not believe it to be strictly necessary “to be on the safe side”. To now introduce a retrospective change of law leading to an accelerated payment of tax is unreasonable. To extend HMRC’s powers without safeguards to taxpayers who by definition have been transparent with the tax authority is unjustifiable. If these provisions are to come in at all then they should only apply to arrangements entered into after Finance Bill 2014 is passed.’