Or will it merely harden the opposition’s resistance?
Last week, HMRC executed what looked like a three-pronged pincer movement on users of tax avoidance schemes. These were;
- When the first case ruling from the “independent” GAAR (General Anti Abuse Rule) Advisory Panel went in HMRC’s favour. This comes hot on the heels of HMRC winning another Judicial Review re: APN’s.
- Their announcement of an EBT “Settlement Opportunity” (SO) for legacy scheme users following their recent Glasgow Rangers success. This is consistent with similar opportunities they have provided in previous years.
- A “Spotlight” article which dismissed crude schemes rebadging loans (as sums of money being held for others) to seek to avoid the forthcoming 2019 outstanding loan charge.
Let’s quickly overview each of these then consider the collective impact(s) and what this might mean for any affected scheme users.
- GAAR: The Advisory Panel ruling is notable for two reasons. Firstly, this is the first time the Panel (created in 2013) has opined. This case concerned a complex scheme involving making payments in gold bullion. Perhaps unsurprisingly, the payments were ruled to be “abnormal and contrived” and even though was in essence a doozy, HMRC enjoy publicly parading any victory however small.
Secondly, the wording of the Panel’s ruling was almost identical rhetoric to that used in HMRC’s own comms (e.g. “..a clear case of taxpayers seeking to frustrate the intent of parliament..”) which some feel calls into question the true independence of the Panel.
- EBT SO: Users of legacy “Disguised Remuneration” schemes have been offered the chance to register an interest in the SO and this may well be welcomed by anyone whose had enough of years of HMRC’s constant (and state-sponsored) harassment tactics. Details as to how it will work are expected over the next few weeks. For legacy scheme users who can’t (or won’t) settle then this will not change the situation one iota. HMRC’s “good cop, bad cop” routine might look clumsy but they must feel it is effective in these situation.
- Spotlight 39 Article (“Disguised Remuneration: re-describing loans”) is another example of HMRC claiming that schemes “don’t work” but provide no technical argument as to why. There is a parallel here with the GAAR Panel in terms of HMRC seeking “low hanging fruit” to obtain a quick win that suggests a sense of momentum is building in what is becoming a draw out death match.
There is irony in that for years scheme users have maintained they received loans whereas HMRC’s contention was they weren’t loans. Now the two sides have swapped positions in that some users are claiming they weren’t loans (but rather payments held in a fiduciary capacity for others) and HMRC now say they are loans for the purpose of being able to tax them in 2019!
The usual fear and intimidation tactics are also present – e.g. threatening criminal prosecution and a “significant penalty” if users don’t complete their tax return the way HMRC wish it to be completed.
These latest three developments all form part of the wider narrative of an ongoing war of attrition between HMRC and tax avoidance. For those fatigued legacy scheme users, HMRC will ultimately hope this latest salvo tips the scales their way and sends users into the SO where more tax can be collected.
The wording of the GAAR ruling certainly had more than a whiff of HMRC’s PR machine about it – however we will await any future rulings as to whether that trend continues. However, for tens of thousands of scheme users who have no interest in cowing down to HMRC’s bully boy tactics (and/or who will not be bludgeoned by a relentless PR machine) these latest developments will have little effect.
Indeed it might well only increase their resolve to “fight the good fight” so that war will continue . History however tells us that in a war of attrition, it is the side with greater resources that typically wins, which in the current climate clearly is HMRC, so assuming the terms are favourable, the SO might well represent a way out to achieve the least worst outcome under the circumstances.