Object to 'pay-up first' avoidance rule – Sample Letter
As I’ve explained to readers of ContractorUK today, we believe it is vitally important that every person affected by Section 58(4) of The Finance Act 2008 write to the official responsible for collating the responses to the consultation – ‘Tackling Marketed Tax Avoidance,’ says Alistair Cliff Renshaw, chairman of No To Retro Tax.
We have therefore prepared a template letter, below, which we would ask you to amend in your own words and writing style, and then submit to HM Revenue & Customs by sending it to email@example.com before Friday 24th February.
Sample letter for contractors to send to Slavica Owen at HMRC
Dear Ms Owen,
I am writing in response to your consultation document, ‘Tackling marketed tax avoidance’, published on 24th January 2014. I would like to register my opposition to the proposals contained in the document as I believe that the course of action proposed by the Government undermines the fundamental principle that individuals should be considered innocent until proven guilty. I also believe that the proposed measures have the potential to create real hardship and injustice in cases where the courts rule against HMRC and in favour of the taxpayer, and that they are likely to be incompatible with human rights legislation.
In particular, I wish to register my strongest possible objection to the proposal that HMRC be given the power to issue a payment notice if there is an open enquiry or appeal on a DOTAS registered tax planning arrangement before the case has been heard in court. I also strongly object to the suggestion that this power should be granted retrospectively and apply to open disputes and appeals going as far back as 2004.
In objecting the proposals set out in the consultation document, I would like to make the following points:
- The proposals for accelerated payments undermine the fundamental principle that everyone has the right to be presumed to be complying with the law unless proven otherwise. Demanding payment up front and giving HMRC the power to demand that a disputed tax balance is paid prior to examination by the courts shifts the burden of proof fundamentally from the accuser to the accused and creates a presumption of guilt rather than a presumption of innocence. As a result, the consultation proposals could be open to challenge in the courts under human rights legislation.
- The proposal to give HMRC the power to issue follower notices to users of arrangements they interpret to be similar arrangements to those already decided in the tax courts also has deeply troubling implications for the rule of law. While some cases where HMRC might wish to issue follower notices may be similar to cases already decided at tribunal, there may be significant differences in the tax arrangements that could have led to a different outcome in a different case. The proposed changes give HMRC too much arbitrary power to determine the efficacy of a user’s tax arrangements and to interpret legislation in a way that suits their own interests. Interpreting the law is the job of the courts, not HMRC.
- I disagree with the proposed method for establishing the payment amount, since this is too arbitrary and gives individuals no right or ability to appeal or challenge HMRC’s calculations. HMRC may believe they have a reasonable estimate of a person’s tax liability, but until their arrangements have been examined by the courts there is the real likelihood that HMRC may have an entirely inaccurate picture of the efficacy of an individual’s tax arrangements and if payment is demanded upfront this could lead to severe financial hardship. The scope for objections should therefore be widened from “erring in process” to encompass the ability to object to the amount due. There should also be scope for spread payments, given that the amount HMRC may ask for could be more than an individual is able to pay at the time.
- The requirement to pay disputed tax upfront, with no right to appeal or challenge the amount, and before any examination has taken place of the efficacy of the tax arrangements in question, has the potential to cause real hardship and injustice, particularly in cases where HMRC’s interpretation is found to be at fault. A taxpayer may be required to sell their home or liquidate their assets to meet any upfront payment, with a fire sale likely meaning that the full value of their assets is unlikely to be realised. While the taxpayer may receive their money back after a period of time, the interest paid on that amount is unlikely to compensate for the upheaval or financial loss that such an arbitrary demand for upfront payment is likely to create.
- When demands for upfront payment are made as a result of unannounced retrospective changes to tax law, such as in the case of Section 58(4) of the Finance Act 2008, despite the tax planning arrangements used being fully compliant with the relevant legislation as it stood at the time, this will essentially give HMRC the power to demand money upfront from taxpayers without regard to the law, undermining faith and confidence in the UK as a place to invest and do business and turning Britain into an effective ‘gangster state’.
- Retrospectively applying accelerated payment notices in cases where taxpayers are currently in dispute with HMRC, including for open or under appeal DOTAS arrangements going back to 2004 as proposed in the consultation document, undermines the principle of certainty before the law. The people who are subject to enquiries from HMRC had an expectation as to how that process would take place. Retrospectively changing the rules half-way through the process undermines natural justice and could be open to legal challenge as a result.
There is real concern that HMRC are moving ahead with accelerated payment notices merely to clear its backlog. By forcing users of entirely legitimate and transparent DOTAS-registered tax arrangements to sell assets to meet up front demands for accelerated payment of disputed monies, with no right to appeal the amount, gives too much power to HMRC and undermines the fundamental principle of innocent until proven guilty.
While I understand that no one wants to drag out appeals without end, and a speedy resolution to tax disputes is in the interests of both HMRC and the taxpayer, undermining the rule of law and giving HMRC sweeping and draconian new powers to interpret legislation in their favour without any effective form of appeal not only undermines natural justice and the rule of law, but diminishes the UK’s cherished reputation as a stable place to invest and do business, while having the potential to create real financial hardship for those who have done nothing more than follow the law as it stood at the time.
For those reasons I would urge you to reject the accelerated payment proposals in the consultation document.
[Insert name and address]
Contractors, whatever individual writing style you have, please ensure your submission highlights the potential injustices that are likely to arise by giving HMRC carte blanche to interpret legislation in this way and demand upfront payment of any amount of money they deem fit before a victim has even had the chance to have their say in the tax court.