Guilty until proven innocent?

Posted 2014 by admin

Personal view by Chris Davies –

Don’t get me wrong. I am certainly not in favour of anyone breaking the law to avoid taxes and I appreciate that HMRC have a real battle to frustrate those who do not intend to pay their fair share of tax, but I do have some concerns about the rationale behind HMRCs plans for accelerated payment in tax avoidance cases.

Firstly, let us not get tax avoidance (legal) confused with tax evasion (illegal). There is no question that anyone targeted by these new rules has done anything outside of the law.

In the past taxpayers may have been persuaded to enter a tax planning arrangement to shelter their income or capital gains from tax. HMRC could then challenge these plans, but the case might take years to resolve before any tax (and interest) was eventually found payable. In the meantime, the taxpayer had the enjoyment of the money.

Under HMRC’s new proposals, there will be a requirement for taxpayers to settle any tax up front where they are told that their circumstances are the same, or similar to one already defeated in the courts.

This effectively means that during the investigation and litigation, the tax will sit in the Exchequers’ coffers and not in the taxpayers’.

The Government’s clear intention is to dissuade taxpayers from entering into legal tax planning schemes in the first place and I can certainly see that many will be so dissuaded.

Is this a good thing? Many may argue that it is, but I believe that under the proposed new system the taxpayer is effectively treated as guilty until he proves his innocence and I cannot help a certain uneasy feeling that this goes against the values that we hold so deep in this Country.

Or maybe I am wrong? What do you think?

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