Editorial
Say ‘no’ to HMRC
A reminder that if you are selected for a visit by HM Revenue & Customs (HMRC) – announced or unannounced – you have considerable rights in the matter and in most cases should be able resist. While I am sure that HMRC will not take advantage of taxpayers’ ignorance of their rights, it is also true that it may not spell them out or give the taxpayer sufficient time to think through the situation. After all, HMRC’s staff will be prepared for any unannounced visit they decide to make – you, your employees and in some cases your family won’t be. By and large, taxpayers always have the right to refuse. If you are concerned about letting HMRC onto your premises (or into your home), you should discuss this with your tax adviser and discuss what you will do if it happens. One policy is to ask HMRC to wait for half an hour in a nearby café while you think about it and take advice. Another policy is to flatly refuse and see what happens. Tax Inspectors aren’t, after all, allowed to use force. My own view is that the only time HMRC should be allowed to make a raid is after proper judicial review in an independent court of law. HMRC has been caught out in an act of dishonesty more than once. Recently, for instance, it applied to a court to raid the offices and home of a firm of tax specialists and withheld important and relevant information from the court. At appeal, the application was thrown out. However, it was expensive and time-consuming and an ordinary taxpayer would not have been able to mount a similar defence.
A useful concession
I was interested to see that under an arrangement set out in appendix 4 of HMRC’s Employment Procedures Manual, it is possible for short-term business visitors to escape PAYE on their earnings. This strikes me as offering some useful tax-planning opportunities. Basically, if you employ someone from overseas to work for you for less than six months of the year and they are resident in a country with which the UK has a double-taxation agreement then they can receive their income tax-free in the UK.
Bargain tax rates
If a good tax deal comes along, my advice is to seize it, as one never knows how long it will last. Whoever is in government, it seems likely that taxes will rise over the next few years and that some of the favourable reliefs will be reduced or withdrawn. For instance, I can’t see the entrepreneurs’ relief surviving long. Nor, for that matter, the current rate of CGT – which is 18%. It is all a gamble, of course, but if you were thinking of disposing of any major assets in the next few years it might be better to accept a lower price now and enjoy an 18% rate of tax than to wait.
OECD at it again
Friday 29th May saw what the Financial Times (FT) described as “a worldwide crackdown on avoidance and evasion by the wealthy” by the Organization for Economic Cooperation and Development (OECD). Strictly speaking, the FT was overstating the case. The occasion was the launch of yet another OECD report on raising additional tax revenue, in this case by pursuing high-net-worth individuals who, it is claimed, “pose a major risk to tax bodies”. The report contains nothing that we haven’t heard before. It criticises the rich because “they are often well versed in finance and tax matters and tend to deploy relatively aggressive strategies” (surprise, surprise), and the overall tone is that those with a few bob are a slippery bunch (sports stars and entertainers are highlighted) that should take what is coming to them. There is the usual attack on offshore financial centres and the usual threats that “individuals, particularly those hiding assets overseas, can expect to see a continuation and ramped-up co-ordination of information sharing among revenue bodies”.
The report’s two most salient points are buried deep in the small print. First, it grudgingly concedes that there is no evidence the rich pay less tax. In fact, in the UK the wealthiest 0.5% of taxpayers contribute 17% of the total income tax. Second, it warns – only obliquely – of the risk that the wealthy might leave a jurisdiction if the level of tax gets too high. As someone who did this over twenty years ago – and who knows many other internationally mobile individuals who have done the same – I can vouch for the truth of this! The OECD has an agenda based on the false premise that revenue will be increased by hounding the rich and shutting down offshore financial centres. It conveniently forgets that developed countries like the UK and US shelter much of the world’s offshore wealth. It also fails to take into account the fact that the best way to deal a body blow to tax havens would be to cut domestic taxes, simplify domestic tax systems and impose draconian penalties on those who attempted to evade paying tax. Such a policy would be fairer, it would raise more money and would put TSR out of business. Sadly, I can’t see it ever happening.
