The tax affairs of particular celebrities, from Chris Moyles to Jimmy Carr to certain members of Take That, have inevitably meant the use of tax avoidance schemes has come in for scrutiny. There is a particular brand of moral outrage reserved for celebrity tax avoidance, the logic being that they of all people can afford to pay their fair share.
Yet at the same time, HM Revenue & Customs itself is not without its critics. The Revenue’s new ability to take tax owed directly from debtors’ bank accounts, albeit with some caveats around who will be targeted, has alarmed MPs on the Treasury select committee, who say the new powers are “extremely worrying and excessive”. The Institute of Chartered Accountants in England & Wales has gone as far as suggesting the powers are potentially illegal.
Against this backdrop, a more worrying development for advisers has gone under the radar. Under powers set out in the Finance Bill, expected to be approved later this month, over 40,000 “accelerated payment notices” are set to be issued over the coming weeks and months.
These will force individuals and businesses to make an upfront payment to cover disputed tax owed within 90 days, even if HMRC has yet to complete its inquiry into the relevant tax avoidance scheme.
Tax and regulatory experts have told Money Marketing they expect a wave of complaints as these payment notices start hitting the doormats – not just with individuals challenging HMRC but also their adviser for recommending a scheme in the first place. HMRC is clearly trying to clamp down on elaborate ruses to avoid tax and effectively close loopholes that never should have existed in the first place.
But it should be careful that in its bid to be a tough enforcer that legitimate tax planning is not curtailed. As one of the commentators points out this week, what was reasonable advice at the time may not be seen as reasonable in today’s unforgiving, take-no- prisoners environment.
For advisers, the message is clear: if you have clients that could be affected, you need to be on the front foot. Ensure that impacted clients know what is coming. Advisers will need to be confident in any recommendations to invest via tax avoidance schemes and that such advice was watertight in terms of suitability. Any challenges will have to be fielded in the knowledge that HMRC is coming at this from the “guilty until proven innocent” point of view.
Natalie Holt is editor of Money Marketing – follow her on Twitter here