Experts challenge UK election tax avoidance promises
Experts have challenged HM Revenue & Customs’ ability to ramp up revenue reclaimed from tax-avoidance schemes following the UK general election, with one suggesting it has already put the “nail in the coffin” with existing anti-avoidance measures.
Despite Labour promising to bring in an additional £7.5bn from anti-avoidance measures, and the Tories and Liberal Democrats promising £5bn and £6bn, respectively, experts have said the UK tax office would need to find new approaches to meet the demands after May’s election.
However, James Quarmby, head of private wealth at Stephenson Harwood, said tax-avoidance schemes were “close to death” following the Conservatives’ controversial tax crackdown over the past year, which is expected to generate £7.6bn through the introduction of Accelerated Payment Notices (APNs), which demand the upfront payment of deferred tax without appeal.
“APNs were the final nail in the coffin of the packaged avoidance schemes,” he said. “I don’t think they will be much lamented, but we need to make sure HMRC doesn’t overreact to the situation by behaving in an overbearing manner.”
He added that the only way it could hope to generate the revenue was by “scaring people” with further APNs and litigation. “I’m afraid the pendulum has swung too far in favour of the Revenue authorities, and this is not good for taxpayers, regardless of their income.”
Issued like candy
Similarly, Jason Collins, partner at Pinsent Masons, questioned what more the Revenue could do to crack down on avoidance, suggesting it had already taken too aggressive a stance, with APNs being “issued like candy”.
“HMRC is running a high stakes strategy,” he said. “If the Supreme Court were to overturn any of these key test cases, it would leave its strategy in a mess.
“We’ve long advocated that HMRC offer out-of-court settlement teams for historical tax avoidance, coupled with an enhanced enforcement regime for future avoidance cases.”
With parties offering few details on how the extra revenue will be generated in the event of their election, Sean Bannister, partner at Edwin Coe, said it could come from tightening the Revenue’s existing policies.
“We believe that the extra revenues will be generated by an increased use of APNs in avoidance cases and, perhaps more importantly, the use of its Connect system, which cross references data to highlight avoidance, to interrogate the raft of tax information that will be made available as a result of the common reporting standard,” he said.
