MPs told of bankruptcy risk for EBT users
In a series of sessions on Finance Bill 2017, the Institute of Chartered Accountants in England and Wales criticised HMRC, reportedly saying it should have “acted far sooner.”
The criticism is based on the institute’s belief that although it is “beyond doubt” that contractors in loan schemes were avoiding tax, the Revenue failed to take “timeous action”.
It is a point also made to the MPs, who are on a committee probing the bill, by Labour MP Anneliese Dodds. “This measure comes after a long period of relative inaction” she said last week.
“That has meant that many people believed the arrangements they entered into were legal and did not constitute tax avoidance.
“The April 2019 change in these circumstances could…cause significant problems, for example to individuals whose situation has changed such that they no longer have the funds to meet the tax charge.”
In response, the Treasury’s Mel Stride sounded unapologetic. “We will certainly be looking at individuals who may have entered into these kinds of arrangements as far back as 1999.
“Critically, they have until 2019 to clean those arrangements up, if they wish to. If the schemes are legitimate and above board, they have no reason to be concerned because those schemes will stand the tests that we have set.”
Stride added that people who are concerned about their ability to “make a full payment of tax” by the 2019 cut-off should contact HMRC at the earliest opportunity, with a view to securing a Time to Pay agreement.
In its submission, the ICAEW urged HMRC to be “sympathetic and flexible” in its approach, the Financial Times reported, and wants the exchequer’s need to recover tax lost to be balanced with legitimate expectations.
Without this balance, bankruptcies which the institute has explicitly warned the MPs about will likely ensue, due to HMRC’s “disproportionate” approach of aggregating past loans (since 1999) to ascertain the tax chargeable by April 5th 2019.
But the Treasury has hinted it will be ‘business as usual,’ saying: “As with all significant revenue-raising measures, we will closely monitor the effect on behaviour as we follow these cases up.”