'More powers to tackle tax advisers who help clients pay less tax'
The Labour Government has pledged to take a “big step forward” in resolving the loan charge scandal, providing HMRC with stronger powers to tackle tax advisers who deliberately help clients pay less tax than the law requires.
The rules will be tightened so HMRC can act more quickly and decisively against advisers, including lowering the threshold for action and increasing penalties with the most serious cases facing fines equal to the tax revenue lost.
These changes will make investigations more effective and introduce tougher penalties linked to the tax revenue lost through an adviser’s actions, according to the Treasury. Following the publication of the Government’s response to Ray McCann’s loan charge review, the Treasury states that where people decide to settle, most individuals could see reductions of at least 50% in their outstanding loan charge liabilities and an estimated 30% of individuals could be able to settle without paying anything.
The Tax Minister Dan Tomlinson, inset, said Mr McCann had been commissioned to look at the loan charge with an open mind. “He’s done a really good piece of work which will help everyone involved and the Government to draw a line under this and to be able to move forward,’’ he told The Yorkshire Post. We believe the decisions we’ve made will help get the balance right so, for people affected by the loan charge, it becomes part of their past rather than a seemingly unending part of their future.
“We also need to balance the need for fairness to all taxpayers. I really hope the thousands of people who have had the loan charge hanging over them for a very long period of time will see the Government has taken this big step forward and will get in touch with HMRC and begin that process of taking up this opportunity.”
Mr Tomlinson said it was clear to him, that after reading Mr McCann’s report and speaking to MPs, campaigners and those affected “that there are some individuals who fall within the scope of the loan charge who probably weren’t informed about the risks of entering the disguised remuneration schemes”.
“Each individual circumstance is unique but the loan charge had a particularly acute impact on people who were on low wages. The Government is willing to take a big step forward to recognise the recommendations that Ray has drawn up, including a reduction in liability that takes some account of the fees, the outstanding loan payments and the interest. I wanted to go further, particularly for those who had smaller liabilities and were lower paid so we’ve taken the first £5,000 off.”
He highlighted the anxieties and the struggles that many people who have been affected by the loan charge have been through for almost a decade. “I also heard this message in opposition and as a constituency MP. I wanted to make sure that we took Ray’s report and implemented his proposals in a way that was fair to the taxpayer and to those affected.
“It is the case that people who are within scope of this review do have a long-standing tax liability and ultimately they do have a responsibility under the law to pay that. The loan charge was exceptional and that’s why we’re taking an exceptional response to make it fairer and provide an opportunity for people to come forward.”
Mr Tomlinson confirmed that HMRC has now made 11 referrals to the Independent Office for Police Conduct (IOPC) where a taxpayer has sadly taken their life and had used a disguised renumeration scheme.
“Every life lost in this way is a tragedy and this Government wants to make sure that those who have been affected by the loan charge can now see a reasonable and fair settlement opportunity that reflects both the taxes owed by individuals but also reflects the circumstances of the loan charge,’’ he said.
“It reflects the need, identified by Ray, to unpick that and find a fairer settlement for them. It’s been difficult for lots of people but this Government wants to take a big step forward and I hope that people will take that step with us.
“I have the utmost respect for the officials and staff in HMRC; it’s an institution that’s going through a lot of change. It is continually trying to improve,’’ he said. He said he would make sure that the organisation communicates with taxpayers promptly, efficiently and respectfully.
“HMRC hasn’t always got it right in terms of its engagement with people in the past. I strongly hope that things will improve and that this big moment in the history of the loan charge, including the £5,000 flat rate reduction in liability, will be seen by people as an opportunity to re-set that relationship.”
Mr Tomlinson said the Government was also making it harder for promoters to profit from promoting tax avoidance. “The first is the universal stop notice, which will introduce a prohibition on promoting tax avoidance arrangements that don’t have any realistic prospect of success,’’ he added. “This stop notice should be powerful. We’re going to give a new power to allow HMRC to require businesses to stop providing goods or services to promoters.
“This is an issue I do wish to continually monitor. I am interested in further ideas about what more the Government can do in this space. Both this universal stop notice and the requirement for businesses to stop providing goods and services to promoters will be important new tools to go after people who are profiting from promoting tax avoidance.
“In this finance bill we’re going to be legislating a new measure to be able to help us go after non-compliant umbrella companies. We believe that is where lots of the disguised remuneration schemes are now taking place,’’ he added. “ He hoped this measure will end up reducing the non-compliance that happens through umbrella companies and will also mean workers do not receive unexpected bills as a result of the tax avoidance that an umbrella company might be engaged in.