The chair of the influential Treasury select committee has criticised HM Revenue and Customs for its handling of legal disputes against film partnership tax avoidance schemes, saying they have led to “very severe” financial distress for some investors.
In a letter to HMRC, select committee chair Andrew Tyrie says he was made aware that the investigations into some of the cases were “not always fair” and the outcomes were unexpected.
Tyrie says: “This has resulted in financial calamity for some of those involved and considerable difficulties for HMRC in bringing a large number of schemes to a close. Many have said that, when these schemes were being sold, they were not considered to be aggressive avoidance but just a deferral of tax, and they were often marketed as routine tax management.
“Whether or not these claims are valid, it does appear that many individuals are facing very severe financial distress as a consequence.”
He says: “I have also heard various individuals’ complaints, which may or may not be justified, about HMRC’ s approach. For example, I have been told that a number of firms and individuals have made suggestions to HMRC for what they consider to be an equitable and pragmatic way of bringing the matter to a conclusion after several years, and that these suggestions have been rejected.”
Tyrie says he wants the issue of “dry income” – which sees people who were denied relief from their costs continuing to be taxes on income that they never benefit from – explained.
He adds: “I would be grateful if you would set out clearly how these matters are being addressed within HMRC and what is being done to ensure that any egregious schemes are not causing other less offensive tax planning arrangements to be caught up in very long running enquiries. The outcome of the court case would also suggest that there is a gap in how partnerships are treated.”
According to the BBC, HMRC responded that it works hard to tackle abuse in the system, ensuring fair and sensitive enforcement.